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ADDRESSES 


Made  at  the 


Fourth  Annual  Meeting 


of 


The  Liability  Insurance 

Association 


HOTEL  PLAZA,  NEW  YORK  CITY 


October  Twentieth 
Nineteen  Ten 


Presented  with  the  Compliments  of 

THE  LIABILITY  INSURANCE  ASSOCIATION 


I 


/■ 


Digitized  by  the  Internet  Archive 

in  2008  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/addressesmadeatfOOIiabrich 


ADDRESSES 


Made  at  the 


Fourth  Annual  Meeting 


of 


The  LiabiUty  Insurance 
Association 


HOTEL  PLAZA,  NEW  YORK  CITY 


October  Twentieth 
Nineteen  Ten 


11  *    > '  > 


>    »  'i 


i'  >  »   )  1 


C.'aAJiaLUA.OuUX. 


.    •    • 

•!  •    • 


»    • 


^  •  • .. :  : 

•    •      •      c. 


Liability  Insurance  Association. 


MEMBERS 

JEtna.  Life  Insurance  Company,  Hartford,  Conn. 

Casualty  Company  of  America,  New  York,  N.  Y. 

The   Employers'   Liability   Assurance   Corporation,    Ltd.,    United    States 

Branch,  Boston,  Mass. 
The  Empire  State  Surety  Company,  New  York,  N.  Y. 
Employers'  Indemnity  Company,  Philadelphia,  Pa. 
The  Fidelity  and  Casualty  Company,  New  York,  N.  Y. 
The  Frankfort    Marine,    Accident  and  Plate  Glass  Insurance  Company, 

United  States  Branch,  New  York,  N.  Y. 
General  Accident  Fire  and  Life  Assurance    Corporation,    Ltd.,    United 

States  Branch,  Philadelphia,  Pa. 
London  Guarantee  and  Accident  Company,  Ltd.,  United  States  Branch, 

Chicago,  111. 
Maryland  Casualty  Company,  Baltimore,  Md. 
New  Amsterdam  Casualty  Company,  New  York,  N.  Y. 
The  Ocean  Accident  and    Guarantee    Corporation,    Ltd.,    United    States 

Branch,  New  York,  N.  Y. 
The  Pennsylvania  Casualty  Company,  Scranton,  Pa. 
Peoples  Surety  Company,  New  York,  N.  Y. 
The  Philadelphia  Casualty  Company,  Philadelphia,  Pa. 
Pacific  Coast  Casualty  Company,  San  Francisco,  Cal. 
The  Standard  Accident  Insurance  Company,  Detroit,  Mich. 
The  Travelers  Insurance  Company,  Hartford,  Conn. 
United  States  Casualty  Company,  New  York,  N.  Y. 
United  States  Fidelity  and  Guaranty  Company,  Baltimore,  Md. 

OFFICERS 

President 

A.  Duncan  Reid,  Executive-Superintendent,  The  Ocean  Accident  & 
Guarantee  Corporation,  New  York,  N.  Y. 

Vice-President 

Theo.  E.  Gaty,  Superintendent  Liability  Department,  The  Fidelity  & 

Casualty  Co.,  New  York,  N.  Y. 

Secretary-Treasurer 

Walter  E.  Hoag,  Assistant  United  States  Manager,  General  Accident 
Fire  and  Life  Assurance  Corporation,  Ltd.,  Philadelphia,  Pa. 

EXECUTIVE  COMMITTEE 

Chairman 

C.  H.  Franklin,  United  States  Manager,  The  Frankfort  Marine,  Accident 
&  Plate  Glass  Insurance  Co.,  New  York,  N.  Y. 

E.  F.  Gkeen,  President,  Pacific  Coast  Casualty  Co.,  San  Francisco,  Cal. 

W.  F.  MooRE,  President,  New  Amsterdam  Casualty  Co.,  New  York,  N.  Y. 

J.  J.  Murray,  General  Superintendent,  Employers'  Liability  Assurance 

Corporation,  Ltd.,  Boston,  Mass. 

And  the  Officers  of  the  Association. 


384730 


INDEX. 

Page. 
Address  of  Miss  Crystal  Eastman 5 

"         *'  Mr.  Augustus  Belmont 16 

"         "  Mr.  H.  V.  Mercer 22 

''  Mr.  John   Mitchell 44 

•*         *'  Mr.  Miles  M.  Dawson 51 

"         "  Mr.  P.  Tecumseh  Sherman 63 

"  Dr.   R.   S.  Keelor • 72 

"  Mr.  Stanley  L.  Otis 82 

"  Mr.  Walter  G.  Cowles 85 


•  •    » 


Address  of  Miss  Crystal  Eastman 

Last  summer  when  Mr.  Lawson  wrote  asking  me  to  give 
a  paper  at  this  Conference,  he  suggested  for  my  title — "Work- 
men's Compensation  from  the  Viewpoint  of  the  Social-Wel- 
fare Worker."  I  resented  this  title  for  two  reasons.  First, 
because  I'm  not  a  "Social-Welfare  Worker'' — I'd  rather  have 
you  know  that  I  am  a  member  of  the  Bar  and  an  officer 
of  the  State.  Second,  because  there  is  no  "social-welfare 
worker's"  point  of  view  toward  the  problems  of  progress — 
no  special  point  of  view,  I  mean.  The  social  worker's  point 
of  view  is  the  point  of  view  of  the  manufacturer  when  the 
competitive  struggle  lets  up  long  enough  for  him  to  look 
rationally  upon  the  life  of  the  community  around  him — of 
the  workman  sure  of  his  job,  who  dares  take  time  to  think  of 
the  common  good — of  the  lawyer  old  and  wise,  or  young  and 
free  enough  to  consider  in  his  idle  moments  how  a  law  serves 
justice,  not  merely  how  it  helps  or  hinders  him  in  winning  a 
case — of  the  insurance  man,  who  in  the  midst  of  his  fight  to 
get  risks  away  from  the  other  fellow,  now  and  then  gets  a 
vision  of  what  vast  service  the  insurance  business  could  be  to 
humanity. 

In  short,  the  social  worker's  point  of  view  is  just  the 
average  good  citizen's  point  of  view,  if  you  catch  him  in  a 
moment  when  he  is  altogether  free  from  that  self  interest 
which  is  as  a  general  thing  so  necessary  to  his  success  in  the 
business  world — it  is  the  point  of  view  of  human  welfare — 
the  common  good.  And  the  reason  why  the  social  worker 
takes  this  point  of  view  all  the  time,  while  the  average  citizen 
takes  it  only  at  his  best  and  freest  moments,  is  that  it  goes 
with  the  social  worker's  job. 

Now,  what  I  resented  was  this:  that  you  should  assume 
that  the  viewpoint  of  general  human  welfare  belonged  ex- 
clusively to  the  social  worker,  that  it  was  none  of  the  em- 
ployer's business,  or  the  workman's  business,  or  the  lawyer's 
business,   or  the   insurance  man's   business.     That's   just   as 


O**  *    ••••'•  ADDReSS' ©^ *MISS  CRYSTAL  EASTMAN 

< 

foolish  as  a  man's  excusing  his  own  sins  with  the  comfort- 
able thought  that  his  wife  is  virtuous. 

I  imagined  you  all  gathered  here  to  discuss  workmen's 
compensation — the  manufacturer  to  urge  going  slow  because 
of  the  danger  to  business — labor  to  stand  for  retaining  its 
right  to  sue — the  lawyer  to  tell  how  hard  it  is  to  get  around 
the  constitution — the  insurance  man  to  figure  up  the  cost — the 
really  important  things.  Then  you  would  settle  back  com- 
fortably in  your  chairs  in  a  somewhat  sentimental  mood  to 
listen  to  the  "social-welfare  worker,"  saying  to  yourselves — 
"Of  course,  this  isn't  important,  but  its  curious  and  interest- 
ing and  will  probably  touch  our  hearts.  She's  bound  to  have 
a  different  point  of  view  from  ours."  Let  me  tell  you  that's 
not  true.  We're  all  bound  to  take  the  same  point  of  view 
toward  this  subject — if  we  stop  to  think — the  point  of  view 
of  justice  and  humanity. 

So  I  wrote  back  to  Mr.  Lawson,  telling  him  that  I  would 
have  none  of  his  title — "From  the  Viewpoint  of  the  Social- 
Welfare  Worker,"  but  that  I  would  be  glad  to  give  a  paper 
on  ^'Workmen's  Compensation  from  the  Viewpoint  of  Justice 
and  Humanity"  That  sounded  easy  last  summer  with  six 
weeks'  vacation  ahead  of  me,  but  the  other  day  when  I 
began  to  think  about  it,  I  felt  like  a  little  girl  who  has  bravely 
set  out  to  spell  a  long  word  that's  too  much  for  her.  And 
I  turned  to  the  dictionary  to  help  me  out.  Well — justice,  ac- 
cording to  Webster,  means  "strict  conformity  to  right  and  ob- 
ligation"— "the  rendering  to  every  one  his  due."  Humanity 
means  "mankind  collectively" — "the  human  race."  It  is  easy 
enough  to  advocate  workmen's  compensation  on  practical 
grounds  of  economy  and  common  sense,  to  show  how  it  will 
reduce  litigation,  and  lessen  strife  between  capital  and  labor. 
But  can  we  reconcile  it  with  justice,  with  "the  rendering  to 
every  one  his  due"?  And  can  we  prove  it  a  reform  important 
to  humanity — to  "mankind  collectively"?    I  think  we  can  and 

that  is  what  I  will  undertake  to  do  this  morning. 

The  time  has  passed  for  arguing  that  the  law  of  em- 
ployers' liability  as  it  exists  in  most  of  our  States  today  is 
unjust.  We  know  it  is — we  admitted  it  long  ago.  My  task 
this  morning  is  constructive.  It  is  to  prove  that  the  principle 
upon  which  workmen's  compensation  laws  are  based  is  funda- 
mentally just. 


ADDRESS  OF  MISS  CRYSTAL  EASTMAN  7 

The  other  day  I  heard  of  a  company  in  Kansas  City 
which  was  going  to  build  a  difficult  piece  of  railroad — it 
would  require  some  blasting  and  tunnelling.  That  company 
established  an  emergency  room  and  engaged  accommodations 
at  a  Kansas  City  hospital  before  a  shovelfull  of  earth  was 
taken  up  for  the  bed  of  their  projected  railroad.  That's 
a  true  story.  No  doubt  many  of  you  could  match  it  with 
similar  ones.  Any  contractor  undertaking  to  build  a  sky- 
scraper, or  a  tunnel,  might  well  make  his  hospital  arrange- 
ments beforehand.  Every  large  steel  company  in  Allegheny 
County  has  an  emergency  building  and  a  regular  yearly  con- 
tract with  a  Pittsburgh  hospital.  What  does  it  all  mean? 
Was  that  Kansas  Railroad  Company  planning  to  conduct  its 
operations  with  criminal  negligence,  regardless  of  the  lives  and 
limbs  of  its  workmen?  Did  they  intend  to  employ  a  set  of 
utterly  reckless  men  who  could  be  counted  on  to  throw  their 
lives  away  at  every  opportunity?  Were  they  on  the  other 
hand  extremely  cautious  and  considerate — were  they  building 
an  emergency  room  and  engaging  hospital  beds  in  the  event 
that  possibly  some  one  workman  might  by  some  unforeseen 
contingency  break  his  finger  in  the  course  of  that  job?  These 
are  foolish  questions.  We  all  know  why  that  company  made 
its  emergency  and  hospital  arrangements  beforehand.  It  was 
because  a  fairly  large  number  of  serious  accidents  were 
practically  certain — no,  absolutely  certain — to  happen  to  the 
workmen  engaged  on  that  piece  of  railroad  building;  the  com- 
pany knew  it — they  could  even  figure  about  how  many  men 
would  get  hurt. 

Given  dynamite,  electricity  —  construction  at  great 
heights — work  under  compressed  air — high  power  machinery 
— red  hot  steel  in  a  dozen  different  shapes — and  accidents 
must  follow  as  surely  as  night  follows  day.  Statistics  prove  it, 
if  we  need  them.  Such  industrial  accident  figures  as  we 
have,  vary  about  as  much  as  the  figures  of  births,  deaths,  and 
marriages.  Any  intelligent  man  must  see  that  an  employers' 
liability  law  based  on  fault  is  ridiculous  in  the  face  of  the 
industrial  accident  situation  of  today.  He  must  ultimately 
acknowledge  the  justice  of  the  new  principle. 

For  Workmen's  Compensation  is  based  on  the  recogni- 
tion of  this  fact — that  in  modern  manufacture,  mining,  con- 


8  ADDRESS  OF  MISS   CRYSTAL  EASTMAN 

struction,  transportation — injury  and  death  to  the  workers  by 
accident  is  inevitable.  And  it  is  further  based  on  this  prin- 
ciple— that  the  economic  loss  which  follows  the  dangerous 
trade,  should  not  be  taken  altogether  out  of  the  injured  work- 
man's pocket,  but  should  be  regularly  shared  by  the  employer. 
Workman  and  employer  alike  profit  by  the  dangerous  enter- 
prise; let  them  share  the  accident  risk.  The  justice  of  this 
fundamental  principle  of  workmen's  compensation  can  hardly 
be  questioned. 

But  there  remain  these  vexing  questions:  "Is  it  just  to 
make  the  employer  compensate  a  workman  whose  injury  was 
due  solely  to  his  own  carelessness?  Is  this  ^strict  conformity 
to  right  and  obligation'?"  "Is  it  just  to  allow  to  the  work- 
man whose  injury  was  due  solely  to  his  employer's  negligence, 
only  half  wages  instead  of  his  entire  loss  from  that  em- 
ployer?" "Is  this  ^rendering  to  every  one  his  due'?"  No — 
of  course  not.  And  it  must  be  admitted  that  a  perfectly 
logical  and  complete  workmen's  compensation  system,  giving 
the  workman  a  right  to  compensation  for  every  accident  in 
the  course  of  work  and  taking  away  from  him  all  rights 
based  on  negligence,  must  sometimes  result  in  both  the  kinds 
of  injustice  I  have  suggested.  It  is  for  this  reason  that  there 
are  exceptions  to  the  operation  of  the  compensation  prin- 
ciple in  almost  all  of  the  European  laws.  Thus,  in  England 
the  right  to  sue  for  negligence  is  retained  as  an  alternative  to 
the  workman,  while  an  accident  due  to  serious  and  wilful 
misconduct  on  the  injured  workman's  part  does  not  call  for 
compensation  unless  it  results  in  serious,  permanent  injury. 
In  France,  if  the  accident  is  "due  to  inexcusable  fault  of 
victim  or  employer,  compensation  may  by  a  court  order  be 
respectively  decreased  or  increased."  That  always  seemed  to 
me  the  most  just  and  rational  solution  of  the  difficulty. 

But  whatever  exception  is  allowed  in  your  compensation 
law  to  cover  the  case  of  a  grossly  negligent  workman  or 
employer — so  long  as  it  is  not  a  broad  enough  exception  to 
vitiate  your  law — it  is  comparatively  unimportant.  I  say  it  is 
comparatively  unimportant  because  there  are,  as  a  matter  of 
fact,  very  few  work-accidents  due,  in  the  last  analysis,  al- 
together to  the  personal  fault  of  either  the  workman  or  the 
employer.     For  this  there  is  much  authority.     I  shall  give  you 


ADDRESS  OF   MISS  CRYSTAL  EASTMAN  9 

only  the  results  of  the  study  I  made  in  Allegheny  County 
under  the  direction  of  the  Pittsburgh  Survey. 

Almost  the  first  thing  we  did  there  was  to  go  to  the 
Coroner's  office  and  make  a  record  of  every  industrial  fatality 
reported  to  the  Coroner  during  the  twelve  months  from  July, 
1906,  to  July,  1907,  taking  down  on  a  separate  card  for  each 
case,  the  name  and  address  of  the  man  killed,  his  age,  oc- 
cupation, the  name  of  his  employer,  the  circumstances  of  the 
accident,  the  names  of  important  witnesses  and  the  verdict. 

We  found  that  in  one  year  526  men  were  killed  by  acci- 
dents of  employment  in  Allegheny  County;  195  steel  workers, 
125  railroaders,  71  miners,  and  135  miscellaneous  workers, 
including  housesmiths,  carpenters,  electric  linemen,  elevator 
men,  teamsters,  and  quarry  men.  Of  these,  nearly  half  were 
American  bom,  70  per  cent,  were  workmen  of  skill  and  train- 
ing and  80  per  cent,  were  under  forty  years  of  age. 

I  made  a  careful  analysis  of  these  fatal  accidents  accord- 
ing to  personal  responsibility,  based  largely  on  evidence  given 
at  the  inquest.  Roughly,  this  was  the  result:  for  30  per  cent, 
of  the  accidents  no  one  was  responsible;  for  30  per  cent,  the 
workman  killed  or  his  fellow  workmen  were  responsible;  for 
30  per  cent,  the  employer,  or  some  one  representing  him  in 
a  position  of  authority,  was  responsible,  and  for  10  per  cent, 
both  the  employer  and  workman  were  responsible.  On  the 
face  of  it,  these  figures  would  seem  to  disprove  my  contention. 
But  a  detailed  study  of  the  accidents  in  these  different  groups 
brought  me  to  the  conclusion  just  expressed — that  work  acci- 
dents seldom  can  be  laid  to  the  direct  personal  fault  of  any 
one.  In  a  few  cases,  the  workmen's  carelessness  was  actu- 
ally inexcusable  fault.  But  for  the  most  part  it  was  ignorance, 
or  inattention  due  to  long  hours  and  intensity  of  work,  or 
recklessness  inevitably  developed  by  a  trade  which  requires 
daring.  In  short  the  careless  workman  we  hear  so  much 
about  is  just  the  natural  product  of  a  dangerous  trade.  You 
cannot  blame  him  for  his  carelessness.  You  must  blame  the 
trade.  Again — in  a  few  cases  the  employer's  carelessness  was 
deliberate  disregard  for  safety  in  the  construction  of  his  plant, 
but  for  the  most  part  it  was  the  human  frailty  of  his  agents, 
the  hasty  mistaken  orders  of  foremen,  or  the  putting  off  of 


10  ADDRESS  OF  MISS  CRYSTAL  EASTMAN 

necessary  repairs  from  day  to  day  so  as  not  to  delay  the 
game — an  ordinary  outcome  of  competition. 

Accidents  happen  in  the  course  of  industry — they  are 
due  to  the  inherent  risks  of  trade — that  is  the  fundamental 
fact.  A  compensation  law  which  should  altogether  disregard 
the  small  element  of  personal  fault  involved  in  the  happen- 
ing of  these  accidents — and  divide  the  economic  loss  resulting 
from  each  accident  evenly  between  the  two  presumably  re- 
sponsible parties  engaged  in  the  dangerous  enterprise,  would 
be  fundamentally  just,  because  it  would  be  based  on  that 
fundamental  fact.  But  we  need  not  altogether  disregard  per- 
sonal fault  in  a  compensation  system,  for,  as  we  have  seen,  ex- 
ceptions can  be  included  in  the  law — so  framed  as  to  avoid 
rewarding  a  wilfully  disobedient  workman  with  money  taken 
from  his  employer's  pocket,  and  so  as  to  avoid  letting  an  em- 
ployer, whose  conscious  violation  of  the  factory  law  has 
meant  death  to  his  workman,  get  ofiF  with  a  payment  of  three 
years'  wages  to  that  workman's  widow. 

Assuredly  we  may  conclude  that  it  is  possible  to  re- 
concile workmen's  compensation  with  justice.  But  I  go  fur- 
ther. I  think  that  a  law  embodying  the  principle  of  work- 
men's compensation — i.  e.,  the  principle  that  the  employer 
should  regularly  share  the  risks  of  trade — is  the  only  law 
on  this  subject  which  can  be  reconciled  with  justice  in  the 
modem  industrial  world. 

So  much  then  for  justice.  Now  let  us  consider  humanity. 
Is  this  reform  of  the  employers'  liability  laws,  this  adoption 
of  a  just  and  sane  system  of  distributing  the  industrial  acci- 
dent risk,  important  to  humanity — not  to  the  men  who  fol- 
low dangerous  trades  only — not  to  their  wives  and  children 
only — ^but  to  "Mankind  collectively" — society  as  a  whole? 

Three  years  ago  we  were  in  the  dark  about  the  actual 
results  of  our  employers'  liability  system.  We  knew  that 
once  in  a  long  while,  a  small  employer  would  be  ruined  by 
a  big  verdict — we  knew  that  pretty  often  the  workman  was 
non-suited — we  knew  that  a  lot  of  money  went  to  lawyers 
and  insurance  companies  that  did  nobody  much  good — ^but 
we  knew  nothing  about  the  injured  workmen  who  never 
brought  suit  or  even  made  a  claim — we  had  no  idea  of  the 
number  of  accident  cases  in  which  the  entire  loss  was  borne 
by  the  workman.     Now  we  have  all  the  figures  we  need — from 


ADDRESS  OF   MISS   CRYSTAL  EASTMAN  II 

Pennsylvania,  Wisconsin,  New  York,  Minnesota,  and  prob- 
ably by  now  from  many  other  States.  Here  are  some  of  the 
figures — just  to  refresh  your  memories: 

In  the  Pittsburgh  accident  study,  among  the  families  of 
married  men  killed,  one-half  suffered  the  entire  loss,  i.  e.,  they 
got  from  the  employer  either  no  compensation  whatever, 
or  merely  funeral  expenses.  Only  one-fourth  of  these  fam- 
ilies got  more  than  $500.  Among  the  families  of  single  men 
with  dependents  65  per  cent,  stood  the  whole  loss  and  only  17 
per  cent,  got  more  than  $500. 

In  injury  cases  we  found  roughly  the  same  proportion — 
56  per  cent,  of  married  men,  66  per  cent,  of  single  men  with 
dependents  and  69  per  cent,  of  single  men  without  depen- 
dents— stood  the  whole  income  loss  resulting  from  their  in- 
juries. For  the  139  cases  of  married  men  killed,  where  we 
learned  both  the  yearly  wages  and  the  compensation,  the 
total  compensation  was  $74,305 ;  the  total  yearly  wages  $109,- 
262.  Thus  the  total  compensation  paid  to  the  dependent 
widows  and  children  amounted  to  less  than  three-fourths  of 
their  first  year's  income  loss. 

During  the  past  year,  the  New  York  State  Commission 
on  Employers'  Liability  carried  on  an  investigation  similar 
to  the  Pittsburgh  study.  Here  are  a  few  of  the  figures  result- 
ing: In  236  fatal  cases,  to  more  than  half  of  the  dependents' 
families  no  compensation  above  funeral  expenses  was  paid. 
In  1040  temporary  disability  cases,  44  per  cent,  did  not  receive 
even  medical  expenses  from  the  employer. 

The  Wisconsin  Industrial  Insurance  Commission  found 
that  out  of  306  injury  cases,  less  than  a  third  received  any- 
thing more  than  medical  expenses  while  in  51  death  cases,  only 
one-third  of  the  families  were  paid  more  than  $500. 

It  seems  hardly  necessary  to  prove  by  statistics  that  these 
innumerable  income  losses  resulting  from  work  accidents, 
borne  wholly  or  almost  wholly  by  the  workers  and  their 
families,  result  in  hardship  and  privation.  Yet  from  the 
Pittsburgh  study  we  have  figures  which  give  some  idea  of 
what  a  work  fatality  means  in  the  home:  Among  132  families 
where  a  husband  and  father  had  been  killed,  53  of  the  widows 
went  to  work,  22  children  were  taken  out  of  school  and  put 


12  ADDRESS  OF  MISS  CRYSTAL  EASTMAN 

to  work,  and  19  families  moved  to  poorer  quarters — all  this 
within  a  year  of  the  accident. 

These  three  items  upon  which  we  have  definite  figures 
merely  suggest  the  problem  of  poverty  which  those  families 
had  to  face.  One-half  of  the  work-accident  victims  were 
earning  less  than  fifteen  dollars  a  week — obviously  not  enough 
to  carry  adequate  life  insurance  at  the  high  rates  necessitated 
by  their  occupations.  The  economic  struggles  of  a  family 
suddenly  deprived  of  that  small  income  can  be  left  to  the  im- 
agination. 

The  New  York  Commission  found  from  its  investiga- 
tion that  among  186  families  of  married  men  killed,  93  widows 
went  to  work,  9  children  under  sixteen  went  to  work,  2*] 
families  reduced  rent,  33  families  had  received  aid,  10  fam- 
ilies were  destitute. 

Now  it  doesn't  take  a  social- welfare  worker  to  see  that 
all  these  hardships  and  privations — repeated  in  thousands  and 
thousands  of  workingmen's  families  all  over  the  country — are 
a  tax  upon  our  real  prosperity.  Every  child  robbed  of  free 
growth  and  education,  compelled  to  go  to  work  too  soon,  is 
a  loss  to  the  community,  a  loss  of  possible  vigorous,  think- 
ing citizenship.  Every  young  family,  whose  income  provider 
has  been  taken,  whose  children  are  left  neglected,  while  the 
mother,  overburdened  with  care  and  anxiety,  struggles  to  do  the 
work  of  two — every  such  thwarted  family  represents  a  social 
loss.  Every  helpless  cripple  left  an  unwilling  burden  on  those 
who  can  ill-afford  to  support  him  is  a  burden  upon  society. 
Every  serious  injury  to  a  bread-winner,  with  weary  weeks 
of  sickness  passed  in  a  scene  of  increasing  poverty,  with  re- 
covery retarded  by  anxiety,  with  savings  dwindling  away  and 
debts  looming  bigger  and  bigger,  the  courage  and  cheer  of  the 
two  homebuilders  finally  lost  in  the  long  disaster,  and  per- 
haps never  to  be  regained — every  such  instance  is  a  community 
loss. 

We  have  facts  enough  before  us  to  adopt  for  the  whole 
country  the  conclusion  reached  by  the  New  York  Commission 
in  its  final  report,  "that  only  a  small  proportion  of  the  work- 
men injured  by  accidents  of  employment  and  the  dependents 
of  those  killed  get  substantial  damages;  that  comparatively 
few  of  the   workmen   in   occupations   which   involve   special 


ADDRESS  OF   MISS   CRYSTAL  EASTMAN  1 3 

hazard  are  earning  enough  to  enable  them  to  provide  adequate 
insurance  against  it;  that,  therefore  through  accidents  of  em- 
ployment thousands  of  workingmen's  families  are  brought  to 
extreme  poverty  and  privation,  the  State  suffers  through  the 
lowered  standard  of  living  of  a  vast  number  of  its  citizens 
and  the  public  is  directly  burdened  with  the  maintenance  of 
many  who  become  destitute." 

Workmen's  compensation  laws  will  change  all  that — 
there's  no  doubt  about  it.  They  will  insure  the  injured  bread- 
winner at  least  half  his  wages  while  he  is  disabled— enough 
to  keep  his  family  from  actual  want.  They  will  insure  to  the 
widow  and  children  of  a  workman  killed  enough  to  tide  them 
over  the  first  few  years — to  keep  them  from  sinking  into 
destitution — to  give  them  a  breathing  space  in  which  to  ad- 
just themselves  to  their  permanent  loss.  From  the  viewpoint 
of  national  welfare,  the  importance  of  preserving  the  stand- 
ard of  living  of  those  thousands  of  workmen's  families — is 
enough  to  warrant  this  reform  if  there  were  nothing  else  at 
stake. 

But  there  is  also  the  prevention  of  accidents — humanity*s 
first  concern.  Will  workmen's  compensation  help  to  reduce 
the  number  of  work-accidents  in  this  country?  If  it  will — 
the  argument  for  it  is  complete — unanswerable.  Opinions 
differ  as  to  this  and  there  are  no  reliable  figures  to  support 
either  side.  My  reason  tells  me  that  a  law  which  would  make 
every  serious  accident  a  certain  and  considerable  expense  to 
the  employer  would  be  more  effective  in  reducing  the  number 
of  industrial  accidents  than  any  other  law  that  could  pos- 
sibly be  devised.  And  in  saying  this  I  do  not  go  back  on 
my  former  statement  that  accidents  are  seldom  due  directly 
to  any  one's  personal  fault. 

We  know,  from  the  much  lower  death  and  accident  rates 
in  the  industries  of  many  E^uropean  countries  that  a  great 
many  of  our  accidents  could  be  prevented.  When  I  got 
through  studying  my  800  Allegheny  County  accidents,  I  de- 


14  ADDRESS  OF   MISS   CRYSTAL   EASTMAN 

cided  that  the  chief  preventable  conditions  from  which  work- 
accidents  result  are  these: 


{ 


I.  Lack  of  provision  for  safety  in  construction. 

2.  Long  hours  of  work. 

3.  Too  great  speed  maintained  in  many  lines  of  work. 

4.  Inadequate  plant  inspection. 

5.  Failure  to  remedy  known  defects. 

6.  Inadequate  warning  and  signal  systems. 

7.  Inadequate  instruction  and  direction  of  ignorant 
workers. 

I  separate  these  conditions  into  two  groups :  Lack  of  pro- 
vision for  safety  in  construction  and  long  hours  of  work 
— make  the  first  group — ^because  they  indicate  the  public's 
chief  lines  of  direct  attack  through  prohibitive  legis- 
lation. The  industrial  accident  rate  can  be  somewhat  reduced 
by  better  factory,  mining  and  railroad  acts.  It  is  not  im- 
possible to  enforce  such  laws.  Furthermore,  a  short  work- 
ing day  in  all  employments  where  accidents  are  common 
could  be  secured  directly  by  legislation  and  might  be  expected 
to  considerably  reduce  those  accidents  due  to  flagging  at- 
tention on  the  part  of  foremen  and  workers. 

But  all  the  other  preventable  conditions  named  must  be 
dealt  with  for  the  most  part  indirectly,  through  the  will  of 
the  employer.  The  law  can,  under  good  administration,  ac- 
tually bring  to  pass  such  mechanical  protections  as  railings 
and  guards,  and  it  can  prevent  men  from  working  twelve 
hours  in  twenty- four.  But  it  can  much  less  effectively  pre- 
scribe how  often  chains  are  to  be  inspected,  or  at  what  stage  a 
defective  car  is  to  be  retired  from  use,  or  what  signaling 
system  is  to  be  inaugurated  for  the  protection  of  men  in 
defenceless  positions,  or  what  part  of  the  work  is  to  be  done 
by  ignorant  foreigners,  or  at  what  speed  work  is  to  be  carried 
on.  Many  of  these  things  are  too  intricately  connected  with 
the  special  problems  of  different  industries  to  be  reached  by 
law.  Moreover,  they  are  the  details  of  daily  management  in 
each  particular  enterprise,  and  must  depend  upon  the  will 
of  him  who  directs  it. 


ADDRESS  OF   MISS   CRYSTAL   EASTMAN  1 5 

To  reach  this  group  of  causes,  therefore,  the  prevention 
of  accidents  must  be  made  of  primary  importance  to  each 
employer.  How  can  the  motive  for  prevention  be  strength- 
ened in  him,  urged  as  he  is  by  all  the  forces  of  a  competitive 
industrial  society  to  make  economy  and  rapidity  of  production 
his  controlling  motives? 

In  the  face  of  this  unremitting  pressure  for  output,  that 
motive  for  prevention  can  never  be  compelling,  I  think,  until 
to  each  injury  and  death  is  affixed  a  uniform  and  unescapable 
penalty.  If  accidents  became  a  heavy  and  determinable  cost 
to  the  business  not  dependent  upon  the  cleverness  of  lawyers, 
the  leanings  of  judges,  or  the  sympathies  of  juries,  but  directly 
proportioned  to  the  number  of  deaths  and  the  number  and 
seriousness  of  injuries  among  the  men  on  the  payroll,  then 
the  prevention  of  them  would  become  of  direct  economic  in- 
terest to  the  employer.  One  economic  motive  would  be  set  off 
against  another.  If  safe,  slow  ways  of  producing  involve  a 
reduction  in  profits,  we  must  see  that  the  human  waste  result- 
ing from  dangerous  quick  ways  shall  involve  a  greater  re- 
duction in  profits.  This  is  not  because  the  employer  is  wicked 
and  must  be  punished,  but  because  he,  like  most  of  us,  is  held 
closely  in  the  grip  of  economic  motives. 

The  interests  of  our  common  welfare  then — the  interests 
of  humanity — emphatically  demand  a  workmen's  compensa- 
tion law — because  it  must  tend  to  lessen  that  terrible  toll  in 
human  life  which  our  industries  exact,  and  because  it  will 
so  distribute  the  accident  loss  that  the  families  of  workers 
killed  and  injured  shall  not  endure  serious  privation — so  that 
the  State  shall  not  permanently  sufiFer  by  their  lowered 
standard  of  living.  The  fundamental  principle  of  workmen's 
compensation  is  just — so  obviously  just  that  when  you  have 
once  grasped  it — any  other  law  seems  appallingly  unjust. 
There  remain  details — matters  of  administration  and  cost  to 
be  worked  out — but  I  submit  that  in  the  long  run — justice  and 
humanity  are  the  only  considerations. 


l6  ADDRESS  OF   MR.   AUGUST  BELMONT 


Address  of  Mr.  August  Belmont 

m 

I  presume  that  I  have  been  invited  to  come  and  say  a 
iew  v^ords  to  you  because  The  National  Civic  Federation  has 
called  upon  the  various  companies  which  you  represent  for 
information  bearing  upon  the  subject  which  you  are  discussing. 
I  regret  that  I  was  not  able  to  arrange  my  affairs  this  morning 
so  that  I  could  listen  to  the  various  addresses  here,  but  it 
was  impossible  and  I  simply  will  outline  to  you  what  the  pur- 
poses of  the  Federation  are. 

I  have  been  appointed  Chairman  of  the  Committee  on 
Compensation  for  Industrial  Accidents  and  Their  Prevention — 
a  matter  which,  of  course,  you  are  discussing  today  and  which 
bears  very  much  upon  the  purposes  and  work  of  the  Civic 
Federation. 

Our  department  is  composed  of  employers,  representative 
labor  men,  attorneys  who  have  given  special  consideration  to 
the  subject,  insurance  experts,  economists.  State  officials,  mem- 
bers of  State  compensation  commissions  and  all  elements  con- 
cerned about  this  great  problem,  from  thirty-five  States,    "But 
quite  apart  from  that  it  is  a  matter  of  interest  to  every  in- 
dividual of  the  community,  because  it  is  recognized  that  the 
subject  is  a  burning  one;  that  something  must  be  done  and 
that  something  is  being  done  in  one  direction  or  another,  al- 
•  ways  bearing  upon  the  one  thing  as  its  ultimate  result.     The 
one  thing  that  is  most  prominent  before  the  people  to-day  is 
the  cost  of  living,  for  you  can  put  no  burden  in  any  form 
upon  the  employer  which,  in  the  long  run,  he  is  not  compelled 
to  secure.     If  it  is  a  burden  greater  than  anything  that  his 
industry  has  borne  in  the  past,  that  he  must  ultimately  secure 
from  the  consumer.     Of  course,  then,  so  far  as  the  insurance 
is  concerned,  the  lower  the  rate  that  you  find  that  you  can 
allow  for  such  insurance  as  will  result  from  this  question  when 
it  is  settled,  so  much  less  will  be  the  burden  upon  the  industries 
and  therefore,   so  much  less   will   it  bear  upon   the  cost  of 


ADDRESS  .OF  MR.  AUGUST  BELMONT  VJ 

production.    That  is  why  every  man,  woman  and  child  in  this 
country  is  interested  in  this  particular  subject." 

The  three  natural  divisions  of  the  work  have  been  assigned 
to  the  following  committees: 

1.  The  Legal  Committee,  which  is  drafting  a  tentative 
compensation  plan  for  uniform  State  legislation,  as  a  substitute 
for  the  present  liability  laws,  with  P.  Tecumseh  Sherman,  as 
Chairman. 

2.  The  Committee  on  Statistics  and  Cost,  of  substituting 
the  compensation  principle  for  the  present  liability  laws,  with 
Sylvester  C.  Dunham,  as  Chairman. 

3.  The  Committee  on  Improvement  of  State  Factory  In- 
spection, it  being  equally  important  to  prevent  as  to  compen- 
sate for  accidents.  Mr.  Louis  B.  Schram  is  Chairman  of  this 
committee. 

Our  Legal  Committee  is  now  considering  a  formulate  bill. 
"Now  that  must  not  frighten  you,  because  it  is  tentative,  the 
object,  of  course,  being  something  that  will  be  fundamentally 
useful." 

Any  plan  adopted  must  conform  to  State  constitutions  and 
court  decisions;  therefore,  the  Committee  will  soon  submit 
its  plan  to  the  Commissioners  on  Uniform  State  Laws  in  the 
forty-six  States  and  territories  and  to  the  Committee  on  Com- 
pensation appointed  by  the  American  Bar  Association,  as  well 
as  to  the  Executive  Committee  of  the  various  State  Bar  As- 
sociations, to  obtain  their  opinions  upon  its  constitutionality 
in  their  respective  States. 

At  the  request  of  The  National  Civic  Federation  the  na- 
tional conference  of  Commissioners  on  Uniform  State  Laws 
and  the  American  Bar  Association  appointed  committees  on 
compensation,  at  their  recent  annual  meetings,  to  co-operate 
with  the  Federation's  Department  on  Compensation  for  In- 
dustrial Accidents  and  Their  Prevention. 

The  Federation's  Legal  Compensation  Committee  hopes 
to  receive  the  advice  sought  from  the  commissioners  and  mem- 
bers of  the  bar  before  reporting  its  plan  finally  to  the  Federa- 
tion's Compensation  Department  at  its  next  meeting. 

Allow  me  to  emphasize  the  fact  that  while  our  Legal 
Committee  has  been  hard  at  work,  it  has  not  reported  as  yet, 
and  it  would  not  do  for  me  at  this  time  to  foreshadow  its 
report. 


1 8  ADDRESS  OF   MR.   AUGUST  BELMONT 

I  will  omit  reference  to  any  technical  features  of  its  work. 

Suffice  it  to  say  that  remedial  legislation  to  be  advocated 
by  the  Civic  Federation  will  be  thoroughly  discussed  by  all 
parties  in  interest  before  it  is  presented  for  passage  to  the 
different  State  Legislatures. 

Our  Committee  on  Statistics  and  Cost  at  present  is  secur- 
ing the  experience  of  Insurance  Companies  relative  to  work- 
men's collective  insurance,  believing  that  statistics  to  be  so  de- 
rived showing  the  total  payroll  upon  which  such  business  has 
been  written  during  the  past  five  years,  the  number  of  em- 
ployes who  sustain  occupational  injuries,  the  period  of  disa- 
bility in  every  case,  the  number  and  nature  of  dismember- 
ments, the  number  of  fatal  cases,  the  number  of  cases  of  per- 
manent disability  and  like  statistics  would  be  more  likely  to 
furnish  the  information  necessary  to  determine  the  cost  of  a 
compensation  plan  than  any  other. 

If  you  approve  of  our  movement,  of  course,  you  can  bring 
to  us  the  information  on  these  very  lines,  giving  us  your 
opinions  which  will  be  an  important  element  in  our  effort  to 
bring  about  the  necessary  legislation.  I  hold  in  my  hands  a 
copy  of  the  letter,  circular  and  schedule,  which  is  being  sent 
to  your  companies,  and  which  has  been  most  carefully  drafted. 
We  have  the  promise  of  many  of  the  companies  to  furnish  the 
statistics  desired. 

I  think  it  would  be  as  well,  and  why  I  give  you  this  de- 
tail, is  that  you  may  understand  better  the  purposes  of  the 
Federation — the  Federation  does  not  assume,  nor  has  it  ever 
on  any  question,  (and  let  it  not  be  understood  with  regard  to 
that)  assumed  to  be  the  arbiter  to  decide  these  questions,  but 
its  purpose  always  is  to  promote  the  carrying  out  of  any- 
thing which  attempts  to  bring  about  a  better  understanding 
between  capital  and  labor.  That  was  what  it  was  originally 
organized  for,  and  when  you  find  it  active  in  one  direction  or 
another,  you  will  understand  that  it  is  doing  so  because  it  feels 
that  it,  above  all  other  organizations,  is  capable  of  bringing 
together  the  greatest  variety  of  opinions  and  men  of  different 
callings  in  a  manner  that  no  other  association  either  attempts 
or  has  made  in  a  successful  endeavor. 

This  was  the  form  of  letter  which  was  addressed  to  the 


ADDRESS  OF  MR.  AUGUST  BELMONT  I9 

presidents  of  the  various  liability  insurance  companies  dealing 
in  accident  insurance: 

Dear  Sir: — The  Committee  on  Statistics  and  Cost — 
one  of  the  committees  of  the  "Department  on  Compen- 
sation for  Industrial  Accidents  and  Their  Prevention" — 
has  requested  me,  as  chairman  of  the  department,  to 
place  before  you  the  enclosed  circular  and  schedule  with 
a  view  to  obtaining  information,  from  your  experience, 
upon  workmen's  collective  insurance  and  employer's  lia- 
bility insurance  written  in  concurrence  with  the  workmen's 
collective.  The  information  sought  is  for  the  use  of  the 
aforesaid  committee  charged  with  the  duty  of  collecting 
statistics  upon  the  cost  of  substituting  compensation  for 
the  present  employer's  liability  laws. 

We  are  asking  all  the  liability  companies,  which  have 
written  these  lines  of  insurance,  for  this  information  with 
the  understanding  that  the  data  obtained  will  be  treated 
as  combined  experience  only. 

In  order  that  the  committee  may  begin  its  examination 
of  the  combined  experience  as  early  as  possible,  we  re- 
quest that  you  give  this  matter  your  early  attention,  if 
convenient. 

If  there  are  any  questions  which  occur  to  you  or  any 
suggestions  you  can  give  the  committee  it  will  be  glad  to 
receive  them. 

Under  separate  cover,  you  will  receive  a  number  of 
the  blank  forms,  corresponding  exactly  to  the  schedule 
above  mentioned,  for  entry  of  the  statistics  desired.  Ad- 
ditional supplies  of  these  sheets  for  the  compilation  of 
statistics  will  be  sent  you  upon  request  to  the  Secretary 
of  the  Executive  Committee. 

Hoping  that  you  will  co-operate  with  us  in  this  im- 
portant endeavor,  I  am. 

Very  truly  yours, 
(Signed)     August   Belmont, 

Chairman. 

Now,  I  am  glad  to  say  that  I  understand  our  committee 
on  cost  is  meeting  with  very  favorable  response  from  the 
various  companies,  showing  that  they  feel  we  are  co-operating 
and  working  in  the  lines  in  which  you  are  yourselves.  Of 
course,  your  whole  object  is  to  insure  against  a  liability. 
Naturally,  it  must  be  a  matter  of  interest  to  you  to  have  con- 
ditions improved  and  to  have  your  liability  minimized.  On  the 
other  hand,  it  is  to  the  interest  of  the  employers  to  have  this 
same  condition  obtain. 


20  ADDRESS  OF  MR.   AUGUST  BELMONT 

A  result  of  the  tabulation  of  statistics  secured  by  our 
Committee  on  Statistics  and  Cost  will  have  a  serious  bearing 
on  what  is  recommended  in  the  way  of  a  bill.  The  important 
thing  is  this :  That  from  the  employer's  standpoint  and  from  the 
standpoint  of  the  insurance  companies,  the  fundamental  prin- 
ciple is  to  insure,  all  based  upon  a  law  of  averages,  and  the 
more  complete  and  more  general  the  employments  covered  by 
a  compensation  plan,  the  more  will  be  reduced  the  cost  of  insur- 
ance, and  uniformity  of  legislation  will  help  in  this  way. 

Personally,  I  believe,  and  it  is  the  one  question  that  tran- 
scends all  the  rest,  that  is  the  idea  of  uniformity.  Uniformity 
means,  as  I  stated  before,  less  cost,  and  as  a  business  man  I 
think  that  is  essential.  Nothing  is  worse  than  that  this  ques- 
tion should  be  left  on  the  one  hand  to,  perhaps,  the  over- 
conservative  employer  who  always  feels  in  the  regulation  of 
his  business,  naturally  as  you  do,  that  he  is  better  fitted  to 
manage  it  than  anybody  else  (that  is  his  general  attitude,  no 
matter  how  progressive  he  is)  and  on  the  other  hand,  the 
pressure  of  labor  which  is  seeking  its  betterment  without  any 
necessary  references  to  the  altruistic  features.  And  the  third 
is  the  sentimentalist  who  does  not  consider  very  much  the 
economic  questions  at  all.  So  that  you  recognize  in  The 
National  Civic  Federation  an  ally  that  wishes  to  bring  to  this 
question  the  most  practical  thought  obtainable. 

It  is  obvious  where  one  State  has  one  kind  of  risk  and 
another  State  another  kind,  the  insurance  company  cannot  take 
the  risk  of  both  at  the  same  cost.  We  all  know  that  New 
York  has  increased  the  rates  as  a  result  of  its  amended  lia- 
bility law  passed  at  the  last  session  of  the  Legislature.  With 
uniform  State  laws,  insurance  companies  could  insure  an  em- 
ployment as  a  whole. 

The  compensation  principle  has  been  accepted  by  all  as 
being  desirable.  To  make  it  applicable  to  all  industries,  with 
due  consideration  to  the  interest  of  employers  and  employees, 
is  our  object,  and,  from  your  standpoint,  I  believe  that  if  it 
is  found  constitutional  to  apply  the  principle  to  all  occupa- 
tions, the  immediate  danger  of  a  prohibitive  schedule  of  in- 
demnities will  be  eliminated. 

I  don't  want  to  detain  you  any  longer,  but  I  wish  to  say 
to  you  that  I  hope  you  will,  in  every  way,  assist  the  Civic 


ADDRESS  OF  MR.  AUGUST  BELMONT  21 

Federation  in   obtaining  data  and   statistics   upon  which  to 
found  a  conclusion  through  which  it  can  co-operate  with  you 
and  all  those  interested  in  bringing  about  a  wise,  effective  and 
economical  result  of  this  important  question. 
I  thank  you,  gentlemen. 


22  ADDRESS  OF   MR.    H.  V.   MERCER 


Address  of  Mr.  H.  V.  Mercer 

Mr.  Chairman,  Ladies  and  Gentlemen: 
^  Question. 

Can  we  pass  constitutional  laws  in  this  country  that  will 
change  the  basis  of  recovery  by  an  employee  for  injuries  re- 
ceived in,  and  arising  out  of,  the  course  of  his  employment 
from  that  of  negligence  or  fault  of  the  employer  to  that  of  a 
risk  of  the  industry  or  compulsory  compensation  with  per- 
missible insurance? 

Our  answer  is  in  the  affirmative,  provided  our  courts  give 
to  the  police  power  that  breadth  of  vision  consistent  with  the 
origin  and  increasing  growth  of  the  general  welfare — if  they 
treat  it  with  the  breadth  it  deserves  and  that  which  other  great 
subjects  have  received. 

There  is  an  agitation  throughout  this  country  unequaled 
upon  any  other  single  subject  in  favor  of  a  fairer  system  of 
compensation  as  a  substitute  for,  or  an  addition  to,  the  com- 
mon law  and  statutory  liabilities,  somewhat  along  the  lines 
now  in  operation  in  twenty-three  foreign  countries. 

No  legislative  subject  in  this  country  has  been  studied 
more  deliberately  in  recent  years.  Employees  have  awakened 
to  the  conditions  in  a  substantial  and  rational  way.  Employ- 
ers are  willing  that  they  should  have  something  that  would 
work  out  more  fairly  and  substantially.  The  State  needs  a 
good  system  for  its  own  protection  and  that  of  its  people. 

Various  estimates  covering  such  accidents  of  this  country 
place  the  number  at  from  300,000  to  2,000,000  per  year.  A 
safe  estimate  would  seem  to  be  500,000. 

The  total  losses  in  killed  and  wounded  in  the  Union  Army 
was  385,245.  (See  Edwin  Emerson,  Jr.,  History  of  the  19th 
Century  Year  by  Year,  p.  1426.)  The  same  authority  puts  the 
total  killed  in  the  Confederate  Army  at  94,000.  Of  course 
there  were  not  so  many  men  employed  as  are  now  in  our 


ADDRESS  OF  MR.   H.  V.   MERCER  23 

industries;  but  the  whole  Confederate  Army — ^valiant  men 
fighting  for  their  liberty  as  they  saw  it — was  unable  to  kill  and 
cripple  as  many  Union  men  in  five  years  of  war  as  are  killed 
and  crippled  in  our  industries  in  a  single  year  now. 

As  early  as  the  first  message  of  Benjamin  Harrison  to 
Congress  in  1889  we  find  this  language,  later  quoted  by  the 
Supreme  Court  in  sustaining  the  Safety  Appliance  Act: 

Johnson  v.  Southern  Pacific  Company,  196  U.  S.  I. 

"It  is  a  reproach  to  our  civilization  that  any  class  of 
American  workmen  should,  in  the  pursuit  of  a  necessary 
and  useful  vocation,  be  subjected  to  a  peril  of  life  and  limb 
as  great  as  that  of  a  soldier  in  time  of  war." 

More  people  understanding  this  to  be  the  situation  are 
willing,  and  are  going  to  be  willing,  to  have  laws  that  will 
tend, — first,  to  prevent  accidents,  and,  second,  fairly  to  com- 
pensate the  injured  for  them  in  such  way  as  to  be  an  induce- 
ment to  both  the  employer  and  employee  to  prevent  the  acci- 
dents. 

No  better  time  will  ever  come  for  fair  legislation  upon 
this  subject,  than  at  the  beginning.  If  the  movement  is  uni- 
form and  held  in  check  long  enough  for  the  question  to  be 
understood  and  the  difficulties  and  remote  consequences  appre- 
ciated, there  ought  not  to  be  any  serious  difficulty  in  passing 
the  necessary  laws. 

At  the  present  time,  as  is  very  well  known,  fault  is  the 
basis  of  recovery  for  such  compensation  under  the  common  law 
and  substantially  all  of  the  statutes,  and  workers*  compensa- 
tion acts  would  be  revolutionary. 

Caution. 

When  a  discussion  starts  as  to  the  rights  of  injured 
humanity,  it  often  carries  with  it  a  sympathy  too  great  for  calm 
judgment. 

In  such  times  our  constitution  has  been  used  both  as  to 
humanitarian  and  property  rights,  as  the  great  bulwark  of  our 
liberty.  It  was  created  as  such  by  its  framers;  it  has  been 
construed  as  such  by  the  courts;  and  loved  as  such  by  the 
people.  Indeed,  it  has  been  the  inspiration  of  liberty  within, 
the  admiration  of  it  without;  and  until  the  trend  of  modem 
times  shall  cease,  the  world  will  grow  nearer  its  model. 


24  ADDRESS  OF  MR.   H.  V.   MERCER 

Some  laws  have  been  passed  on  this  subject  in  other  coun- 
tries that  may  be  well  enough  for  them,  but  could  not  be  main- 
tained here  or  be  well  enough  for  us. 

So  it  was  on  other  subjects  when  and  why  the  constitution 
was  made.  Through  the  system  which  we  call  our  Bill  of 
Rights,  drawn  largdy  from  the  historic  experiences  of  our  an- 
cestors, we  have  in  times  past  felt  much  security.  There  are 
those  who  think  that  the  constitution  needs  amendment  for  the 
present  subject  to  allow  more  radical  legislation  than  it  will 
permit ;  but  we  must  not  forget  that  it  has  served  us  well  upon 
other  subjects;  that  it  has  stood  as  limitations  against  unreason- 
able conduct;  that  it  has  been  blended  to  meet  the  actual  con- 
ditions in  most  valuable  respects  as  they  have  arisen  during 
our  history,  and  that  being  only  fundamental  law  declaring 
general  inhibitions  and  prohibitions,  with  a  few  grants,  it  ought 
not  to  be  disturbed  unless  necessity  requires. 

Some  times  erroneous  decisions  have  been  made  under 
it ;  so  have  they  under  other  laws ;  but  on  the  whole,  if  under- 
stood and  treated  with  respect  to  the  relations  of  the  particular 
subjects  under  decision,  very  little  criticism  can  be  found  from 
the  beginning  of  our  Government  to  the  present  day  upon  the 
decisions  of  the  courts  of  last  resort  upon  constitutionality  of 
laws.  As  a  rule  courts  are  bound  to  respect  the  law  as  it  is 
written ;  to  attempt  to  treat  it  with  that  consideration  which  it 
deserves  and  to  accomplish  the  end  it  was  made  to  reach  as  a 
system. 

The  courts  have,  as  a  rule,  attempted  to  close  their  ears 
to  the  special  clamor  of  temporary  enthusiasm  unless  it  be 
enacted  into  legislation  which  is  the  only  legitimate  way  a 
people  can  speak  to  its  courts.  They  may  recognize  a  well 
regulated  system  of  what  is  known  as  judicial  knowledge.  It 
is  their  purpose  to  aid  government  in  a  fair  and  just  manner 
to  accomplish  the  ends  of  public  necessity,  in  accord  with  our 
constitutional  or  fundamental  law,  but  not  against  it. 

In  the  case  of  Evans-Snider-Busl  Co.,  et  al.,  v.  McFadden, 
et  al,  105  Fed.  293  (8  C.  C.  A.),  the  Court  said: 

''When  called  upon  to  resolve  questions  like  the  one 
in  hand,  the  courts  have  never  deemed  it  necessary  to 
close  their  eyes  to  the  equities  of  the  case,  but  have  fre- 
quently permitted  their  judgments  to  be  influenced  by  the 


ADDRESS  OF  MR.   H.  V.   MERCER  2$ 

consideration  that  that  which  the  legislature  has  done  in 
the  way  of  disturbing  rights  acquired  under  existing  laws 
was  morally  right,  and  in  accordance  with  justice  and  fair 
dealing." 

And  in  McCulloch  v.  Maryland,  4  Wheaton,  416,  in  holding 
that  Congress  had  not  exceeded  its  powers  in  creating  the 
national  bank,  the  great  Chief  Justice  Marshall  said: 

"Let  the  end  be  legitimate,  let  it  be  within  the  scope 
of  the  constitution,  and  all  means  which  are  appropriate, 
which  are  plainly  adapted  to  that  end,  which  are  not  pro- 
hibited, but  consistent  with  the  letter  and  spirit  of  the 
constitution,  are  constitutional.  *  *  *  3^1-  ^here  the 
law  is  not  prohibited,  and  is  really  calculated  to  effect  any 
of  the  objects  entrusted  to  the  Government,  to  undertake 
here  to  inquire  into  the  degree  of  its  necessity,  would  be 
to  pass  the  line  which  circumscribes  the  judicial  depart- 
ment, and  to  tread  on  legislative  ground.  This  Court  dis- 
claimed all  pretensions  to  such  a  power." 


And  in  Knox  v.  Lee,  12  Wallace,  457,  in  speaking  again 
for  that  great  court  as  to  The  Legal  Tender  Cases,  Mr.  Justice 
Strong  said : 

"It  is  not  to  be  denied  that  acts  may  be  adapted  to  the 
exercise  of  lawful  power  and  appropriate  to  it  in  seasons 
of  exigency  which  would  be  inappropriate  at  other  times." 

In  the  course  of  that  opinion  he  also  said,  in  requoting 
from  I  Wheaton,  326: 

"The  Constitution  unavoidably  deals  in  general  lan- 
guage. It  did  not  suit  the  purpose  of  the  people  in  fram- 
ing this  great  charter  of  liberties  to  provide  for  minute 
specifications  of  its  powers,  or  to  declare  the  means  by 
which  those  powers  should  be  carried  into  execution." 

He  also  said  in  that  connection : 

"We  do  not  expect  to  find  in  a  constitution  minute 
details.  It  is  necessarily  brief  and  comprehensive.  It 
prescribes  outlines,  leaving  the  filling  out  to  be  deduced 
from  the  outlines." 

Now,  will  the  Court  treat  this  subject  with  that  breadth 
consistent  with  the  origin  and  increasing  growth  of  our  consti- 
tution, and  with  that  respect  and  consideration  which  they  have 
given  other  great  subjects  of  public  necessity? 


26  ADDRESS  OF  MR.   H.  V.   MERCER 

In  this  respect,  too,  we  must  not  overlook  the  fact  that  the 
employer  and  the  employee  do  not  stand  upon  an  equality  in 
their  negotiations  with  respect  to  dangerous  employments. 
Stripped  of  political  perplexities  and  personal  prejudices  and 
ambitions,  the  fact  is,  and  must  be  recognized,  that  the  funda- 
mental reason  for  the  interference  by  the  State  with  respect  to 
these  matters  rests  upon  the  bare  fact  of  the  inequality  of  abili- 
ties of  the  respective  parties  to  take  care  of  their  interests  by 
reason  of  the  peculiar  situations.  In  the  case  of  Harbison  v. 
Knoxville  Iron  Co.,  53  S.  W.  955,  the  Act  required  time  checks 
to  be  redeemed  in  money  instead  of  merchandise  if  demanded, 
and  the  Court  said : 

"The  Legislature,  as  it  thought,  found  the  employee 
at  a  disadvantage  in  this  respect,  and  by  this  enactment 
undertook  to  place  him  and  the  employer  more  nearly  upon 
an  equality.  This  alone  commends  the  Act,  and  entitles 
it  to  a  place  on  the  statute  book  as  a  valid  police  regula- 
tion." 

The  Supreme  Court  of  the  United  States  approved  this 
opinion  in  Knoxville  v.  Harbison,  183  U.  S.  13. 

In  respect  to  the  length  of  hours  dangerous  labor  may 
be  required,  it  was  said  by  the  Supreme  Court  in  Holden  v. 
Hardy,  169  U.  S.  366: 

"The  Legislature  has  also  recognized  the  fact,  which 
the  experience  of  Legislatures  in  many  States  has  cor- 
roborated, that  the  proprietors  of  these  establishments 
and  their  operatives  do  not  stand  upon  an  equality,  but 
that  their  interests  are,  to  a  certain  extent,  conflicting." 

Then  in  the  case  of  Narramore  v.  Cleveland,  etc.,  Ry.  Co., 
96  Fed.  298,  a  case  involving  the  rights  of  railway  employees 
to  have  switches  blocked,  while  Judge  Taft  was  sitting  on  the 
Circuit  Court  of  Appeals,  he  used  this  language: 

"The  only  ground  for  passing  such  a  statute  is  found 
in  the  inequality  of  terms  upon  which  the  railway  com- 
pany and  its  servants  deal  in  regard  to  the  dangers  of 
their  employment.  The  manifest  legislative  purpose  was 
to  protect  the  servant  by  positive  law,  because  he  had 
not  previously  shown  himself  capable  of  protecting  him- 
self by  contract;  and  it  would  entirely  defeat  this  pur- 
pose thus  to  permit  the  servant  'to  contract  the  master 
out'  of  the  statute," 


ADDRESS  OF  MR.   H.  V.  MERCER  27 

holding  in  fact  that  the  statute  must  not  be  destroyed  by  con- 
tract. This  is  not  the  only  decision  where  Judge  Taft  favored 
labor.  See  Baltimore  &  O.  R.  Co.  v.  Henthorne,  y2>  Fed.  634, 
wherein  he  said: 

"The  defendant  complains  of  the  action  of  the 
court  below  in  permitting  evidence  of  the  general  repu- 
tation of  Harrison  for  drunkenness  and  consequent  in- 
competency as  an  engineer.  It  should  be  premised  that 
this  was  accompanied  by  evidence  that  Harrison's  drunken 
condition  was  the  cause  of  the  accident,  and  by  further 
evidence  that  Harrison  was  in  the  habit  of  getting  drunk. 
It  was  entirely  competent  to  show  Harrison's  general 
reputation  for  the  purpose  of  showing  that  the  defendant 
was  negligent  in  retaining  him  in  its  employ.    *     *     *     * 

This  is  one  of  the  personal  obligations  of  the  master 
to  the  servant  which  he  cannot  rid  himself  of  by  dele- 
gating it  to  an  agent  to  perform.  *     *     *     * 

Nor  does  he  fully  discharge  all  of  the  obligation  to 
his  servants  by  fully  inquiring  concerning  the  applicant's 
fitness  at  the  time  he  takes  him  into  the  service.  It  is 
the  master's  duty  to  exercise  proper  supervision  over  the 
work  of  his  servants,  and  through  such  supervision  to 
keep  himself  advised  as  to  the  continued  fitness  of  those 
in  his  employ.     *     *     * 

Objection  is  made  by  counsel  for  the  company  also 
that  the  plaintiff's  contributory  negligence  was  made  out 
so  clearly  that  the  case  should  have  been  taken  from 
the  jury.  This  objection  cannot  be  sustained.  The  de- 
fendant swore  that  he  did  not  know  of  Harrison's  drunk- 
enness, and  the  circumstances  were  such  as  to  make  this 
possible,  and  an  issuable  fact  for  the  consideration  of 
the  jury.  The  Court  charged  the  jury  that  if  he  did  know 
of  Harrison's  drunkenness,  he  could  not  recover.  We 
do  not  wish  to  be  understood  as  affirming  that  it  would 
necessarily  have  been  contributory  negligence  on  the  part 
of  a  new  brakeman,  which  would  bar  him  from  recovery 
in  this  case,  not  to  leave  the  engine  when  he  found  the 
engineer  drunk.'* 

An  employee  cannot  successfully  say  to  a  railway  presi- 
dent, "Run  your  business  carefully  or  I  will  quit." 

There  is  an  apparent  suggestion  to  the  contrary  on  equal- 
ity in  Lochren  v.  N.  7.,  198  U.  S.  45,  but  carefully  limited  to 
non-dangerous  employments  where  there  was  no  inequality 
of  capacity  or  ability  to  contract. 


28  ADDRESS  OF  MR.   H.  V.   MERCER 

We  must  then  assume  that  the  courts  and  our  president 
as  a  court  are  rather  inclined  to  favor  legislation  which  tends 
to  recognize  and  overcome  the  disadvantages  of  the  employee 
in  dangerous  employments;  indeed  little  can  be  found  in  the 
history  of  our  constitutional  law,  that  contradicts  the  fact  that 
in  most  lines  of  conduct  judicial  questions  are  ultimately  set- 
tled, consistently  with  progress  and  within  the  Constitution. 

In  most  instances  when  necessary  laws  have  been  vitiated 
it  has  been  the  fault  of  the  law,  not  of  the  constitution.  In 
many,  if  not  most  instances,  adverse  decisions  have  been 
valuable  to  jurisprudence  as  a  system,  and  consequently  to 
society. 

This  subject  will  only  be  an  exception,  if  at  all,  because 
better  safeguarded. 

The  fear  of  our  constitutions,  both  Federal  and  State, 
is  unnecessary;  their  clear  understanding  as  a  system  is  quite 
essential.  The  fear  has  become  so  great  in  this  country  that 
when  the  commissioners  of  a  great  State,  appointed  to  study 
this  question,  stood  up  in  the  Interstate  Convention  of  Com- 
missioners, at  Atlantic  City,  and  again  at  Washington,  they 
told  us  that  almost  all  the  opinions  they  got  from  numerous 
inquiries  at  the  bar  were  adverse  to  the  power  to  create  such 
legislation.  We  believe  then  and  believe  now  that  enough 
study  would  create  different  opinions — provided  that  State 
too,  observed  well  settled  principles  in  enacting  the  law.  They 
did  pass  a  law  that  was  perhaps  not  the  best  system  they 
could  have  made  with  more  time  and  thought,  and  the  first 
court  of  New  York  holds  even  it  valid. 

Can  we,  within  our  system,  pass  legislation  accomplishing 
the  following  results: 

(o)  A  code  or  system  of  law  of  workers'  compensation 
repealing  all  other  liabilities  and  containing  permissible  insur- 
ance features ; 

(b)  Defining  all  occupations  as  dangerous  in  just  pro- 
portion to  their  accidents ; 

(c)  Establishing  a  board  of  arbitrators,  consisting  of  one 
from  employers,  another  from  employees,  and  one  mutual 
member  to  determine  the  amount  and  nature  of  the  injuries 


ADDRESS  OF  MR.  H.  V.  MERCER  29 

on  fair  hearing  and  making  submission  a  condition  precedent 
to  the  right  to  recover; 

(d)  Fixing  the  compensation  on  the  wage  basis  and  for 
the  length  of  disabihty  and  nature  of  disfigurement,  and 
allowing  the  employer,  if  sufficiently  insured,  to  keep  a  small 
percentage  of  the  carrying  charges  out  of  the  wages,  raising 
the  compensation  correspondingly  higher. 

Dual  System  of  Constitutions. 

We  must  not  overlook  the  fact  that  our  constitutional 
system  is  a  dual  one  consisting  of  a  Federal  Constitution  of 
but  delegated  powers  and  State  Constitution  of  limitations 
upon  powers. 

We  study  the  Federal  Constitution  to  see  whether  the 
powers  have  been  delegated  to  that  government  or  prohibited 
or  limited  to  the  States;  we  study  the  State  Constitution  to 
see  if  the  subject  has  been  prohibited  to  it  for  general  legis- 
lation; and  if  done  through  paternaHsm  to  see  if  special  power 
has  been  given  or  special  lines  of  limitation  placed.  Under 
the  scheme  we  suggest,  the  latter  principle  will  not  necessarily 

be  discussed. 

Federal  Power. 

The  Federal  Constitution  has  three  separate  and  distinct 
lines  of  delegated  powers  for  legislation: 

(a)  The  things  specifically  delegated,  which  touch 
this  matter  through  the  power  to  regulate  commerce — 
foreign,  interstate  and  Indian — but  not  the  police  power 
with  respect  to  such  commerce. 

In  Railway  Co.  v.  Husen,  95  U.  S.  465,  L.  ed.  530-1,  in 
reaching  the  conclusion  that  the  State  of  Missouri  had  unduly 
regulated  interstate  commerce,  the  Court  stated  in  effect  that 
while  the  police  power  was  not  granted  over  such  commerce 
to  the  Federal  Government,  the  rights  were  so  nearly  granted 
as  to  compel  the  courts  to  guard  it  with  diligence  against  need- 
less intrusion,  but  admitted  the  following  principle : 

"We  are  thus  brought  to  the  question  whether  the 
Missouri  statute  is  a  lawful  exercise  of  the  police  power 
of  the  State.  We  admit  that  the  deposit  in  Congress  of 
the  power  to  regulate  foreign  commerce  and  commerce 
among  the  States  was  not  a  surrender  of  that  which  may 
properly  be  denominated  police  power." 


30  ADDRESS  OF  MR.   H.  V.   MERCER 

In  the  case  of  Mayor,  Alderman,  et  al.  of  New  York  v. 
Miln,  II  Peters,  102  L.  ed.  660-62-64,  there  is  an  elaborate 
opinion  on  the  poHce  powers.  In  February,  1824,  the  legisla- 
ture of  New  York  passed  an  act  providing  that  the  Master 
of  every  vessel  arriving  in  New  York  from  a  foreign  port,  or 
from  a  port  of  any  of  the  States  other  than  New  York,  was 
required  under  certain  penalties  within  a  certain  time  to  report 
in  writing,  containing  the  names,  ages,  and  last  local  settle- 
ment of  every  person  who  should  have  been  on  board  the 
vessel  during  the  voyage,  and  that  if  any  of  the  passengers 
should  have  gone  on  board  any  other  vessel  and  landed  at  any 
other  place  with  a  view  to  proceed  to  New  York  the  same 
should  be  stated  in  the  report.  The  corporation  of  the  City 
of  New  York  instituted  an  action  under  this  law  for  debt 
against  the  Master  of  the  ship  Emily  to  recover  the  penalties 
imposed  by  this  act,  etc.  The  defendant  demurred  to  the 
declaration  and  the  judges  of  the  Circuit  Court  being  divided 
in  opinion  as  to  whether  or  not  this  act  regulated  trade  and 
commerce  between  New  York  and  foreign  ports  and  was 
therefore  unconstitutional  and  void,  certified  the  case  to  the 
Supreme  Court.  The  Supreme  Court  reached  the  conclusion 
that  it  was  not  a  regulation  of  commerce  but  of  police.  That 
Court  held  that  all  those  powers  which  relate  to  merely  muni- 
cipal legislation  or  which  may  more  properly  be  called  internal 
police  are  not  surrendered  or  restrained;  consequently,  in  rela- 
tion to  them  the  authority  of  a  State  is  complete,  unquali- 
fied and  exclusive. 

The  Court  said  on  page  134: 

"We  shall  not  enter  into  any  examination  of  the 
question  whether  the  power  to  regulate  commerce  be  or 
be  not  exclusive  of  the  States,  because  the  opinion  which 
we  have  formed  renders  it  unnecessary;  in  other  words, 
we  are  of  opinion  that  the  act  is  not  a  regulation  of  com- 
merce, but  of  police;  and  that  being  thus  considered,  it 
was  passed  in  the  exercise  of  a  power  which  rightfully 
belonged  to  the  States.     *     *     * 

We  choose  rather  to  plant  ourselves  on  what  we 
consider  impregnable  positions.  They  are  these:  that 
a  State  has  the  same  undeniable  and  unlimited  jurisdic- 
tion over  all  persons  and  things  within  its  territorial 
limits  as  any  foreign  nation,  where  that  jurisdiction  is 
not  surrendered  or  restrained  by  the  Constitution  of  the 


ADDRESS  OF  MR.   H.  V.  MERCER  3 1 

United  States.  That,  by  virtue  of  this,  it  is  not  only  the 
right  but  the  bounden  and  solemn  duty  of  a  State,  to  ad- 
vance the  safety,  happiness  and  prosperity  of  its  people, 
and  to  provide  for  its  general  welfare,  by  any  and  every 
act  of  legislation  which  it  may  deem  to  be  conducive  to 
these  ends;  where  the  power  over  the  particular  subject, 
or  the  manner  of  its  exercise  is  not  surrendered  or  re- 
strained in  the  manner  just  stated.  That  all  those  powers 
which  relate  to  merely  municipal  legislation,  or  what  may, 
perhaps,  more  properly  be  called  internal  police,  are  not 
thus  surrendered  or  restrained;  and  that,  consequently, 
in  relation  to  these,  the  authority  of  a  State  is  complete, 
unqualified  and  exclusive." 

In  McLean  v.  Denver  &  R.  G,  R,  R.  Co.,  203  U.  S.  38-47 
(L.  ed.  78),  it  is  said: 

"It  has  been  too  frequently  decided  by  this  Court  to 
require  the  restatement  of  the  decisions,  that  the  exclu- 
sive power  to  regulate  interstate  commerce  is  vested  by 
the  Constitution  in  Congress,  and  that  other  laws  which 
undertake  to  regulate  such  commerce  or  impose  burdens 
upon  it  are  invalid.  This  doctrine  has  been  reaffirmed 
and  announced  in  cases  decided  as  recently  as  the  last 
term  of  this  court.  While  this  is  true,  it  is  equally  well 
settled  that  a  State  or  a  Territory,  for  the  same  reasons, 
in  the  exercise  of  the  police  power,  may  make  rules  and 
regulations  not  conflicting  with  the  legislation  of  Con- 
gress upon  the  same  subject,  and  not  amounting  to  regu- 
lations of  interstate  commerce." 

(b)  The  delegation  of  all  legislative  power  for  the  dis- 
trict which  has  been  designated  as  District  of  Columbia,  the 
forts  and  arsenals,  etc. 

(c)  The  power  to  make  all  rules  and  regulations  respect- 
ing the  territories.  Both  of  these  delegations  cover  the  police 
power  and  general  powers  of  legislation.  The  commerce 
clause,  as  such,  was  not,  in  my  opinion,  intended  to  cover  the 
territories. 

(d)  The  power,  then,  to  legislate  upon  this  question  by 
the  Federal  Government  within  the  States  does  not  come 
as  an  element  of  the  police  power,  unless  that  power  can  be 
spelled  out  of  the  taxing  powers  of  the  Government,  a  ques- 
tion too  technical  and  intricate  to  develop  in  a  semi-lay  paper 
on  such  short  notice.  It  would  seem  that  without  considering 
the   relation   which   the   State   has  to  the  police  power,  the 


32  ADDRESS  OF  MR.   H.  V.  MERCER 

majority  of  the  Court  meant  to  hold  the  power  to  legislate 
to  protect  employees  to  exist  under  the  interstate  commerce 
clause  in  Howard  v.  ///.  Central  R.  Co.,  207  U.  S.  461.  And 
without  considering  the  question  of  police  power  in  Pierce  v. 
Van  Dusen,  78  Fed.  693  (6  C.  C.  A.)  Mr.  Justice  Harlan  and 
then  Circuit  Judges  Taft  and  Lurton  (now  President  and 
Associate  Justice  respectively)  held  that  until  Congress  acted 
upon  safety  appliances  as  to  employees  engaged  in  inter- 
state commerce,  the  States  might  do  so. 

In  Adair  v.  U.  S.,  208  U.  S.  161,  the  Supreme  Court  held, 
with  two  dissents  and  one  absent  judge,  that  there  was  no 
such  connection  between  interstate  commerce  and  member- 
ship in  a  labor  organization  as  to  authorize  Congress  to  make 
it  a  crime  against  the  United  States  for  an  agent  or  officer  of 
an  interstate  carrier  to  discharge  an  employee  from  service 
to  such  carrier  because  of  his  membership  in  a  labor  union; 
the  Court  holding  that  in  the  matter  of  the  refusal  of  em- 
ployment, and  discharge  from  employment,  they  stood  on  an 
equality,  and  that  Congress  did  not  have  power  to  make  either 
a  crime,  holding  that  this  was  not  in  fact  a  regulation  of  com- 
merce. 

The  Court  said: 

"No  such  rule  of  criminal  liability  as  that  to  which 
we  have  referred  can  be  regarded,  in  any  just  sense,  a 
regulation  of  interstate  commerce." 

Whether  the  taxing  power  or  the  power  to  regulate  com- 
merce give  any  authority  to  Congress  to  legislate  uniformly 
on  this  question  as  has  been  suggested  from  numerous 
sources,  we  prefer  not  at  this  time  to  express  an  opinion; 
but  that  the  States  do  have  sufficient  power  to  legislate  for 
self-protection  under  the  police  power,  we  have  no  doubt. 

(e)  It  is  true  of  both  the  State  and  Federal  Government 
that  they  have  power  to  legislate  covering  the  regulation  of 
those  in  their  own  employ. 

Atkin  V.  Kansas,  191  U.  S.  205  (148-159). 

(/)  The  prohibitions  upon  the  part  of  the  Federal  Gov- 
ernment, so  far  as  they  apply  to  the  States,  are  found  in  the 
14th  Amendment  to  the  Federal  Constitution.  Those  prohi- 
bitions, in  so  far  as  they  are  difficult  to  meet  and  put  into 
popular  language,  are: 


ADDRESS  OF  MR.   H.  V.   MERCER  33 

1.  The  requirement  that  the  laws  shall  give  equal  pro- 
tection ; 

2.  That  they  shall  be  reasonably  necessary  and  limited  to 

dangerous   employment,   and   not   mere   arbitrary   enactments 

seeking  to  make  employments   dangerous  which  are  not  in 

fact  dangerous. 

Power  of  the  States. 

1.  The  State  may  repeal  the  common  law  and  statutory 
liabilities  as  to  all  subsequent  accidents. 

Generally  speaking,  it  is  the  rule  that  a  party  has  no 
vested  interests  to  a  right  of  action  at  common  law  for  a 
future  injury.  A  tort  action  grows  out  of  a  breach  of  the 
duty  which  the  State  provides  that  one  of  its  individuals  owes 
to  another,  either  by  reason  of  the  peculiar  situation  as  be- 
tween the  parties,  or  by  reason  of  a  public  burden  which  has 
a  peculiar  favor  in  it  for  the  one  who  is  injured.  This  direct 
liability  the  State  has  imposed  by  the  implied  adoption  of  the 
common  law  or  by  statute,  both  of  which  it  has  the  power  to 
repeal.  It  has  repealed  or  has  modified  the  common  law  or 
statutes  every  time  it  has  imposed  a  new  obligation  or  taken 
away  an  old  obligation  with  respect  to  tort  actions.  See  Mar- 
tin V.  Pittsburgh  and  L.  E.  R.  Co.,  203  U.  S.  284;  Holden  v. 
Hardy,  169  U.  S.  366;  Snead  v.  Central  of  Georgia  Ry.  Co., 
151  Fed.  608. 

2.  With  respect  to  the  remedy,  we  think  that  the  remedy 
suggested  here  is  the  appropriate  and  proper  one.  It  would 
be  so  if  it  were  fire  insurance.  See  Wild  Rice  Lbr.  Co.  v. 
Royal  Ins.  Co.,  99  Minn.  190.  Such  a  law,  leaving  the  gen- 
eral question  of  liability  to  be  determined  and  simply  pro- 
viding a  reasonable  method  of  estimating  and  ascertaining  the 
amount  of  the  loss,  is  unquestionably  valid  in  both  this  coun- 
try and  Europe.  See  Hamilton  v.  The  Liverpool  and  London 
Ins.  Co.,  136  U.  S.  242,  and  cases  therein  cited. 

3.  The  fact  that  the  liability  is  conditioned  upon  the  appli- 
cation of  a  remedy  does  not  in  any  way  affect  the  constitu- 
tionality if  it  is  carried  out  as  we  suggest.  The  theory  is  that 
until  the  appraisal  is  made  by  the  award  provided  there  is  no 
liability.  See  President,  etc.,  F.  &  H.  Canal  Co.  v.  Penn. 
Coal  Co.,  50  N.  Y.  250 ;  Wolff  v.  Liverpool,  L.  &  G.  Ins,  Co., 


34  ADDRESS  OF  MR.   H.  V.   MERCER 

50  N.  J.  Law,  453 ;  Hall  v.  Norwalk  Fire  Ins.  Co.,  57  Conn. 
105 ;  Reed  v.  Washington  Ins.  Co.,  138  Mass.  572. 

4.  The  State  must  avoid  its  own  restrictions  and  comply 
with  the  14th  amendment: 

(a)  Equal mlegal  protection  under  the  14th  Amendment 
has  given  alarm  in  some  quarters.  It  has  not  seemed  to  us 
serious  if  the  law  he  properly  drawn. 

"The  amendment  gave  no  new  privileges  or  immuni- 
ties to  the  citizens  of  the  States,  but  only  additional  guar- 
antees to  those  then  existing. 

See  Boutwell  on  the  Const.,  at  end  of  First  Cent. 
Minor  v.  Hoppersett,  21  Wall.  162,  L.  Ed.  627. 

The  office  of  the  United  States  is  limited  to  the 
enforcement  of  the  duty  of  the  States  to  secure  the 
equality  of  immunities  and  privileges. 

U.  S.  V.  Cruikshank,  92  U.  S.  542,  L.  Ed.  588." 

It  also  seems  to  be  the  general  rule  that  the  matter  of 
equal  protection  of  the  laws  is  construed  by  the  Federal  Court 
as  it  is  by  our  own  State  Court,  to  permit  reasonable  classifi- 
cations if  all  within  the  class  are  treated  alike. 

In  Hold  en  v.  Hardy,  169  U.  S.  366,  L.  Ed.  780,  it  is  said : 

"The  14th  Amendment  does  not  profess  to  secure 
to  all  persons  in  the  United  States  the  benefit  of  the  same 
laws  and  the  same  remedies.     *     *    * 

'There  is  nothing  in  Magna  Charta,  rightly  con- 
strued as  a  broad  charter  of  public  right  and  law,  which 
ought  to  exclude  the  best  ideas  of  all  systems  and  of 
every  age ;  and  as  it  was  the  characteristic  principle  of  the 
common  law  to  draw  its  inspiration  from  every  fountain 
of  justice,  we  are  not  to  assume  that  the  sources  of  its 
supply  have  been  exhausted.  On  the  contrary,  we  should 
expect  that  the  new  and  various  experience  of  our  own 
situation  and  system  will  mould  and  shape  it  into  new 
and  not  less  useful  forms.  We  have  seen  no  reason  to 
doubt  the  soundness  of  these  views.'  " 

H olden  v.  Hardy,  169  U.  S.  366.      , 

And  again  in  Atchison,  Topeka  &  Santa  Fe  Ry.  Co.  v.  Mat- 
thews, 174  U.  S.  96,  the  Court  said : 

"The  equal  protection  of  the  laws  which  is  guar- 
anteed by  the  Fourteenth   Amendment   does   not   forbid 


ADDRESS  OF  MR.   H.  V.   MERCER  35 

classification.     That  has  been  asserted  in  the  strongest 
language.    Barbier  v.  Connolly,  113  U.  S.  27  (28  L.  Ed. 

823)." 

And  again: 

"It  is  the  essence  of  a  classification  that  upon  the 
class  are  cast  duties  and  burdens  different  from  those 
resting  upon  the  general  public.  *  *  *  Indeed,  the 
very  idea  of  classification  is  that  of  inequality  so  that  it 
goes  without  saying  that  the  fact  of  inequality  in  no  man- 
ner determines  the  matter  of  constitutionality." 

Atchison,  Topeka  &  Santa  Fe  Ry.  Co.  v.  Matthews, 
174  U.  S.  96  (L.  Ed.  909-915). 

And  in  Consolidated  Coal  Co.  v.  Illinois,  185  U.  S.  203,  an 
act  of  the  legislature  of  Illinois  requiring  inspection  of  mines 
where  more  than  five  men  were  employed  was  before  the 
Court;  it  said: 

"The  regulation  of  mines  and  miners,  their  hours  of 
labor,  and  the  precautions  that  shall  be  taken  to  insure 
their  safety,  health,  and  comfort,  are  so  obviously  within 
the  police  power  of  the  several  States  that  no  citation 
of  authorities  is  necessary  to  vindicate  the  general  prin- 
ciple. *  *  *  It  is  true  that  the  act  of  1897  amended 
the  former  law  of  1895,  by  limiting  its  application  to  coal 
mines,  'where  more  than  five  men  are  employed  at  any 
one  time.'  This  is  a  species  of  classification  which  the 
legislature  is  at  liberty  to  adopt,  provided  it  be  not  wholly 
arbitrary  or  unreasonable.  *  *  ♦  jj^  ^.j^^  ^,^sg  under 
consideration  there  is  no  attempt  arbitrarily  to  select 
one  mine  for  inspection,  but  only  to  assume  that  mines 
which  are  worked  upon  so  small  a  scale  as  to  require  only 
five  operatives  would  not  be  likely  to  need  the  careful 
inspection  provided  for  the  larger  mines,  where  the 
workings  were  carried  on  upon  a  larger  scale  or  at  a 
greater  depth  from  the  surface,  and  where  a  much  larger 
force  would  be  necessary  for  their  successful  operation. 
It  is  quite  evident  that  a  mine  which  is  operated  by  only 
five  men  could  scarcely  have  passed  the  experimental 
stage,  or  that  precautions  necessary  in  the  operation  of 
coal  mines  of  ordinary  magnitude  would  be  required  in 
such  cases.  There  was  clearly  reasonable  foundation 
for  a  discrimination  here." 

Consolidated  Coal  Co.  et  al.  v.  Illinois,  185  U.  S. 
203,  L.  Ed.  873. 


36  ADDRESS  OF  MR.   H.  V.  MERCER 

In  State  v.  Smith,  58  Minn.  35,  our  Court  sustained  an 
act  requiring  street  railway  companies  to  make  enclosures  for 
their  motormen.    The  Court  said : 

*'The  objection  that  this  is  class  legislation  is  based 
on  the  fact  that  the  act  is  confined  to  street  cars  pro- 
pelled by  cable,  steam,  or  electricity,  and  does  not  include 
street  cars  drawn  by  mules  and  horses,  or  carriages  or 
wagons;  and  it  is  assumed  that  here  is  an  attempt  at 
purely  arbitrary  classification  for  the  purpose  of  the  act. 

The  evil  sought  to  be  remedied  does  not  exist  in 
case  of  the  slowly  going  mule  or  horse  car,  or  carriage 
or  wagon,  to  the  same  degree  as  in  the  case  of  cable, 
electric,  or  steam  cars." 

But  there  must  be  a  basis  for  distinction. 

Dobbins  v.  Los  Angeles,  195  U.  S.  223. 

On  the  question  of  equal  protection  a  somewhat  lengthy 
and  what  at  first  seems  a  formidable  opinion  against  classi- 
fication for  equal  protection  in  the  State  liability  laws  (S.  D. 
Stat.)  was  rendered  on  April  12,  1910,  in  M.  &  St.  P.  Ry.  Co. 
V.  Westby,  178  Fed.  619,  by  the  8.  C.  C.  A.,  holding  the  law 
void  because  the  classes  are  too  extensive. 

But  in  the  case  of  Louisville  &  N.  Ry.  Co.  v.  Milton, 

argued  April  28-29,  1910,  and  decided  May  31,  1910,  p.  676, 

the   Supreme  Court  in  construing  the   Indiana  statute   held 

that : 

"In  other  words,  reduced  to  its  ultimate  analysis  the 
contention  comes  to  this:  that  by  the  operation  of  the 
equal  protection  clause  of  the  14th  Amendment,  the 
States  are  prohibited  from  exerting  their  legitimate  police 
powers  upon  grounds  of  the  generic  distinction  obtaining 
between  persons  and  things,  however  apparent  such  dis- 
tinction may  be;  but,  on  the  contrary,  must  legislate  upon 
the  basis  of  a  minute  consideration  of  the  distinctions 
which  may  arise  from  accidental  circumstances  as  to  the 
persons  and  things  coming  within  the  general  class  pro- 
vided for.  When  the  proposition  is  thus  accurately  fixed 
it  necessarily  results  that  in  effect  it  denies  the  exist- 
ence of  the  power  to  classify,  and  hence  must  rest  upon 
the  assumption  that  the  equal  protection  clause  of  the 
14th  Amendment  has  a  scope  and  effect  upon  the  lawful 
authority  of  the  States  contrary  to  the  doctrine  main- 
tained by  this  Court  without  deviation.  This  follows, 
since  the  necessary  consequence  of  the  argument  is  to 
virtually  challenge  the  legislative  power  to  classify,  and 


ADDRESS  OF  MR.  H.  V.  MERCER  37 

the  numerous  decisions  upholding  that  authority.  To 
this  destructive  end  it  is  apparent  the  argument  must 
come,  since  it  assumes  that,  however  completely  a  classi- 
fication may  be  justified  by  general  considerations,  such 
classification  may  not  be  made  if  inequalities  be  detected 
as  to  some  persons  embraced  within  the  general  class  by 
a  critical  analysis  of  the  relation  of  the  persons  or  things 
otherwise  embraced  within  the  general  class." 

In  that  opinion  the  Court  also  said: 

*'The  equal  protection  of  the  law  clause.  That  the 
14th  Amendment  was  not  intended  to  and  does  not  strip 
the  States  of  the  power  to  exert  their  lawful  police  au- 
thority is  settled,  and  requires  no  reference  to  authorities. 
And  it  is  equally  settled — as  we  shall  hereafter  take  occa- 
sion to  show — as  the  essential  result  of  the  elementary 
doctrine  that  the  equal  protection  of  the  law  clause  does 
not  restrain  the  normal  exercise  of  governmental  power, 
but  only  abuse  in  the  exertion  of  such  authority,  there- 
fore, that  clause  is  not  offended  against  simply  because, 
as  the  result  of  the  exercise  of  the  power  to  classify, 
some  inequality  may  be  occasioned.  That  is  to  say,  as 
the  power  to  classify  is  not  taken  away  by  the  operation 
of  the  equal  protection  of  the  law  clause,  a  wide  scope 
of  legislative  discretion  may  be  exerted  in  classifying 
without    conflicting   with   the    constitutional   prohibition. 

It  is  beyond  doubt  foreclosed  that  the  Indiana 
statute  does  not  offend  against  the  equal  protection  clause 
of  the  14th  Amendment,  because  it  subjects  railroad  em- 
ployees to  a  different  rule  as  to  the  doctrine  of  fellow 
servant  from  that  which  prevails  as  to  other  employ- 
ments in  that  State.  Tullis  v.  Lake  Erie  &  W.  R.  Co., 
175  U.  S.  348,  44  L.  ed.  192,  20  Sup.  Ct.  Rep.  136;  Pitts- 
burg,  C.  C.  &  St.  L.  R.  Co.  v.  Ross,  212  U.  S.  560,  53  L. 
ed.  652,  29  Sup.  Ct.  Rep.  688." 

The  essence  of  the  whole  thing  is  that  classification,  if 
reasonably  necessary,  may  be  made,  if  all  in  a  class  are  equally 
treated. 

Some  argument  has  been  produced  to  the  effect  that  it 
would  be  difficult  to  hold  the  employer  in  case  he  had  no 
fault,  but  fault  is  not  necessarily  the  basis  of  liability  in  such 
cases.  See  Chicago,  R.  I.  &  Pac.  Ry.  Co.  v.  Zernicke,  183  U. 
S.  582. 

The  man  who  put  into  operation  the  dangerous  machinery 
of  dangerous  employment  would  be  liable  by  reason  of  public 
necessity  to  be  controlled  under  the  elements  of  the  police 


38  ADDRESS  OF  MR.   H.  V.   MERCER 

power  for  the  protection  of  the  general  welfare.  It  has  been 
intimated  that  this  rule  would  not  apply  except  in  the  case 
of  quasi  public  corporations,  but  this  is  not  the  law.  Rela- 
tions otherwise  private  may  become  public  under  public 
necessity  if  the  State  decides  that  the  public  needs  protection. 
See  State  v.  Wagener,  'jy  Minn.  483;  Harbison  v.  Knoxville 
Iron  Co.,  183  U.  S.  13. 

It  is  for  the  Legislature  first  to  determine  whether  or  not 
this  is  a  proper  classification,  and  if  there  be  reasonable  basis 
for  declaring  the  employment  to  be  dangerous,  the  courts  will 
follow  the  judgment  of  the  Legislature,  even  though  their 
own  judgment  might  not  accord  with  that  of  the  Legisla- 
ture. See  Lochner  v.  N.  Y.,  198  U.  S.  45 ;  Holden  v.  Hardy, 
169  U.  S.  365. 

The  police  power  of  the  several  states  was  never  dele- 
gated by  the  Federal  Constitution,  nor  prohibited  by  that  in- 
strument from  reasonable  State  exercise. 

A  search  of  the  Federal  Constitution  fails  to  reveal  any 
delegation  of  the  police  power  within  the  States;  neither  the 
Federal  nor  State  Constitutions  have  prohibited  it  to  the 
State,  except  to  the  extent  of  requiring  equal,  reasonable,  and 
lawful  regulations: 

In  United  States  v.  DeWitt,  9  Wall.  41,  L.  Ed.  593-4, 
the  Court  said : 

"If  the  public  safety  or  the  public  morals  required 
the  discontinuance  of  any  manufacture  or  traffic,  the 
hand  of  the  Legislature  cannot  be  stayed  from  provid- 
ing for  its  discontinuance  by  any  incidental  inconvenience 
which  individuals  or  corporations  may  suffer.  All  rights 
are  held  subject  to  the  police  power  of  the  State." 

In  the  United  States  v.  DeWitt,  9  Wall.  41,  L.  Ed.  593-4, 
through  an  opinion  by  Chief  Justice  Chase,  the  Supreme 
Court  said,  in  relation  to  a  Federal  law,  making  it  a  misde- 
meanor to  mix  certain  kinds  of  oils : 

"As  a  police  regulation  relating  exclusively  to  the 
internal  trade  of  the  States,  it  can  only  have  effect  where 
the  legislative  authority  of  Congress  excludes  territorially 
all  State  legislation  as  for  example  in  the  District  of  Co- 
lumbia. Within  State  limits  it  could  have  no  constitu- 
tional operation.  This  has  been  so  frequently  declared 
by  this  Court;  results  so  obviously  from  the  terms  of  the 


ADDRESS  OF  MR.   H.  V.  MERCER  39 

Constitution,  and  has  been  so  fully  explained  and  sup- 
ported on  former  occasions,  that  we  think  it  unnecessary 
to  enter  again  upon  the  discussion." 

In  Mugler  v.  Kansas,  123  U.  S.  623,  it  is  said: 

******  State  legislation,  strictly  and  legiti- 
mately for  police  purposes,  does  not  in  the  sense  of  the 
Constitution,  necessarily  intrench  upon  any  authority 
which  has  been  confided,  expressly  or  by  implication,  to 
the  National  Government." 

This  makes  it  evident  that  the  police  power,  generally  speak- 
ing, rests  in  the  State  government,  except  over  such  terri- 
tory as  Congress  has  the  power  to  control. 
State  Police  Power  not  Delegated  to  the  Federal  Government. 
In  Mugler  v.  Kansas,  123  U.  S.  623-668,  re-quoting  from 
a  former  decision,  it  is  said: 

**That  power  belonged  to  the  States  when  the  Federal 
Constitution  was  adopted.  They  did  not  surrender  it  and 
they  all  have  it  now — It  rests  upon  the  fundamental  princi- 
ple that  every  one  shall  so  use  his  own  as  not  to  wrong 
and  injure  another." 

The  14th  Amendment  not  Designed  to  Destroy  the  State's 

Police  Power. 

In  Barbier  v.  Connolly,  113  U.  S.  27  L.  Ed.  923,  it  is 
clearly  held : 

**It  would  be  an  extraordinary  usurpation  of  the 
authority  of  the  municipality  if  a  Federal  tribunal  should 
undertake  to  supervise  such  regulations." 

And: 

"But  neither  the  Amendment,  broad  and  compre- 
hensive as  it  is,  nor  any  other  amendment,  was  designed 
to  interfere  with  the  power  of  the  State,  sometimes  termed 
its  police  power." 

Liberty  of  Contract  Between  Employer  and  Employee  Does 

Not  Mean  License. 

There  is  no  appreciable  constitutional  difficulty  in  uni- 
form State  legislation  for  workmen's  compensation  acts  if 
we  treat  this  subject  with  a  comprehension  of  the  few  limita- 
tions as  distinguished  from  the  fear  of  the  many  bugaboos. 


40  ADDRESS  OF  MR.  H.  V.  MERCER 

The  Fourteenth  Amendment  secures  the  Liberty  of  Con- 
tract between  Employer  and  Employee  except  when  limited 
by  the  Police  Power;  the  Exercise  of  the  Police  Power  rests 
in  the  Legislative  Department;  the  Courts  interfere  to  uphold 
the  Constitution  only  to  prevent  Arbitrary  power  from  being 
exercised  under  cover  of  the  Police  Power. 

Freedom  of  Contract  Is  Liberty. 

This  is  the  great  Federal  Constitutional  question  with 
respect  to  Workmen's  Compensation  Acts.  Can  we  say  that 
employer  and  employee  must  stand  by  regulations  upon  this 
question.    In  my  opinion,  yes. 

The  police  power — the  public  power  to  protect  the  inter- 
ests of  humanity  for  public  preservation  is  the  safety  valve 
here. 

In  Adair  v.  U.  S.,  208  U.  S.  161  (L.  Ed.  436),  Mr.  Jus- 
tice Harlan  re-quotes  from  Lockner  v.  New  York,  198  U.  S. 
45,  as  follows: 

"The  general  right  to  make  a  contract  in  relation  to 
his  business  is  part  of  the  liberty  of  the  individual  pro- 
tected by  the  14th  Amendment  of  the  Federal  Constitu- 
tion." 

Later  on  the  Court  says: 

«  *  *  *  'pj^g  right  to  purchase  or  to  sell  labor 
is  part  of  the  liberty  protected  by  this  amendment,  unless 
there  are  circumstances  which  exclude  the  right." 

Liberty  of  Contract  Not  Absolute  When  Applied  to  Employer 
and  Employee  in  Dangerous  Employments. 

In  Holden  v.  Hardy,  169  U.  S.  366  (L.  Ed.  789),  the 
Supreme  Court  held: 

"This  right  of  contract,  however,  is  itself  subject  to 
certain  limitations  which  the  States  may  lawfully  impose 
in  the  exercise  of  its  poHce  powers." 

The  Court  also  said: 

"Of  course,  it  is  impossible  to  forecast  the  character 
or  extent  of  these  changes,  but  in  view  of  the  fact  that, 
from  the  day  Magna  Charta  was  signed,  to  the  present 
moment,  amendments  to  the  structure  of  the  law  have 
been  made  with  increasing  frequency,  it  is  impossible  to 
suppose  that  they  will  not  continue,  and  the  law  be  forced 


-  y 

ADDRESS  OF  MR.  H.  V.  MERCER  '     4I 

to  adapt  itself  to  new  conditions  of  society,  and  particu- 
larly, to  the  new  relations  between  employer  and  em- 
ployees, as  they  arise." 

In  Atchison,  etc.,  Ry.  Co.  v.  Matthews,  174  U.  S.  96  (L. 
Ed.  909),  in  discussing  a  statute  of  Kansas  respecting  fire 
cases,  the  Court  said: 

"But  neither  the  amendment  (14th) — ^broad  and  com- 
prehensive as  it  is — nor  any  other  amendment — was  de- 
signed to  interfere  with  the  power  of  the  State,  some- 
times termed  its  police  power,  to  prescribe  regulations 
to  promote  the  health,  peace,  morals,  education  and  good 
order  of  the  people,  and  to  legislate  so  as  to  increase  the 
industries  of  the  State,  develop  its  resources,  and  add  to 
its  wealth  and  prosperity." 

In  the  case  of  Johnson  v.  Southern  Pacific  Ry.  Co.,  196 
U.  S.  I,  it  was  held  that  the  equipment  of  cars  with  automatic 
couplers  might  be  required  by  Congress. 

In  Knoxville  Iron  Co,  v.  Harbison,  183  U.  S.  13,  the 
Court  said: 

"But  it  is  also  true,  that,  inasmuch  as  the  right  to 
contract  is  not  absolute  in  respect  to  every  matter,  but 
may  be  subjected  to  the  restraints  demanded  by  the  safety 
and  welfare  of  the  State  and  its  inhabitants,  the  police 
power  of  the  State  may,  within  defined  limitations,  extend 
over  corporations  outside  of,  and  regardless  of,  the  power 
to  amend  charters.  Atchison  T.  &  S.  F.  R.  Co.  v.  Mat- 
thews, 174  U.  S.  96  L.  Ed.  909,  19  Sup.  Ct.  Rep.  609." 

In  208  U.  S.  411,  with  respect  to  the  limitations  upon  the 
right  of  contract,  the  Court  said: 

"It  is  undoubtedly  true,  as  more  than  once  declared 
by  this  Court,  that  the  general  right  to  contract  in  rela- 
tion to  one's  business  is  part  of  the  liberty  of  the  indi- 
vidual, protected  by  the  14th  Amendment  to  the  Federal 
Constitution ;  yet  it  is  equally  well  settled  that  this  liberty 
is  not  absolute  and  extending  to  all  contracts,  and  that 
a  State  may,  without  conflicting  with  the  provisions  of 
the  14th  Amendment,  restrict  in  many  respects  the  indi- 
vidual's power  of  contract.  *  *  *  »  (Muller  v.  Oregon, 
208  U.  S.  411,  L.  Ed.  551-555)- 

The  majority  opinion  in  the  case  of  Lochner  v.  New  York, 
198  U.  S.  45,  refers  to  Holden  v.  Hardy  as  one  of  the  cases 
wherein  the  Court  has  treated  the  police  powers  with  liberal 


42  ADDRESS  OF   MR.    H.  V.   MERCER 

construction,  but  the  Lochner  case  although  holding  against 
the  validity  of  that  law  admits : 

"The  State,  therefore,  has  power  to  prevent  the  indi- 
vidual from  making  certain  kinds  of  contracts,  and  in 
regard  to  them  the  Federal  Constitution  offers  no  pro- 
tection."       « 

The  general  control  of  moral  conduct,  health  provisions 
and  bodily  protection  have  always  been  conceded  to  stand 
above  individual  rights  of  conduct.  Organized  society  is 
charged  with  general  security  and  protection.  It  must  use 
good  judgment  to  ascertain  the  necessities  and  execute  the 
remedies.  The  individual  must  act  in  subservience  to  this 
protection  and  within  this  judgment;  if  such  it  be  as  distin- 
guished from  arbitrary  action,  the  State  may  provide  the 
remedy. 

Indeed  in  Holden  v.  Hardy,  the  Court  said: 

"These  employments,  when  too  long  pursued,  the 
legislature  has  judged  to  be  detrimental  to  the  health  of 
the  employees,  and  so  long  as  there  are  reasonable 
grounds  for  believing  that  this  is  so,  its  decision  upon  this 
subject  cannot  be  reviewed  by  the  Federal  Courts." 

At  page  57  the  Court  said: 

"This  is  not  a  question  of  substituting  the  judgment 
of  the  Court  for  that  of  the  Legislature.  If  the  act  be 
within  the  power  of  the  State  it  is  valid,  although  the 
judgment  of  the  Court  might  be  totally  opposed  to  the 
enactment  of  such  a  law.  But  the  question  would  still  re- 
main: Is  it  within  the  police  power  of  the  State,  and 
that  question  must  be  answered  by  the  Court." 

It  is  upon  this  theory  that  the  Court  is  able  to  protect 
and  preserve  this  power  and  to  hold  as  it  did  in  Muller  v. 
Oregon,  208  U.  S.  412,  L.  Ed.  551,  that  while  the  liberty  of 
contract  is  a  property  right  of  the  individual 

"Yet,  it  is  equally  well  settled  that  this  liberty  is  not 
absolute  and  extending  to  all  contracts,  and  that  a  State 
may,  without  conflicting  with  the  provisions  of  the  Four- 
teenth Amendment,  restrict  in  many  respects  the  individ- 
ual's power  of  contract." 

This  whole  question  relates  to  the  use  of  property,  as 
well  as  personalty;  it  may  be  machinery  or  the  right  to  con- 


ADDRESS  OF  MR.   H.  V.   MERCER  43 

tract — each  equally  property — but  it  is,  nevertheless,  a  limit- 
ation upon  the  use.  This  limitation  is  based  upon  the  theory 
that  the  use  is  dangerous  and  the  consequences  must  follow 
as  a  legal  duty.  Judged  by  the  usual  rule  of  following  moral 
obligations  with  human  law,  this  legal  duty  is  a  proper  one. 
Judged  by  the  implied  condition  that  law  only  recognizes 
the  ownership  and  use  of  property  by  virtue  of  the  social  com- 
pact, the  owner  is  not  an  absolute  one,  except  in  the  private 
sense — his  rights  are  always  subservient  to  the  necessary  public 

control.  When  he  enters  or  adopts  the  social  compact  he  im- 
pliedly so  agrees. 

With  an  evil  as  disastrous  in  totals  as  was  our  civil  war; 
with  twenty-three  of  the  greatest  foreign  countries  committed 
to  the  change;  with  several  States  acting  through  commissions 
to  form  scientific  legislation  on  the  question;  with  a  fair,  al- 
most urgent,  agitation  by  substantially  all  persons  who  under- 
stand the  evils  and  insufficiences  of  the  present  system,  it 
would  seem  to  require  a  very  peculiar  judge  to  hold  that  a 
law  fairly  drawn,  as  a  compensation  act  in  dangerous  employ- 
ments, should  be  held  an  arbitrary,  as  distinguished  from  a 
discreet,  legislative  act. 

For  a  fuller  discussion  see  Report  of  Atlantic  City  Con- 
ference, July  29-31,  pp.  54-216. 


44  ADDRESS  OF  MR.  JOHN  MITCHELL 


Address  of  Mr.  John  Mitchell 

Mr.  Chairman: — 

"Industrial  accidents  and  compensation  for  losses  caused  by 
them"  is  a  subject  in  which  the  workingmen  are  more  directly 
interested  than  any  other  group  in  society,  and  while  I  hold 
no  commission  from  the  wage  earners  that  gives  me  the 
right  to  speak  for  them,  yet,  I  am  confident  that  in  a  general 
way  that  which  I  have  to  say  will  also  express  their  sentiment. 
Primarily,  the  working  men  are  more  concerned  with  the 
means  of  preventing  industrial  accidents,  than  they  are  with 
the  subject  of  compensation  for  losses  caused  by  them.  It  is 
all  very  well  for  a  workman  to  receive  looo  dollars  for  the 
loss  of  an  eye  or  the  loss  of  a  leg,  but  it  is  much  better  for 
the  workman,  as  it  is  for  society,  that  the  eye  or  the  leg  be 
not  lost. 

It  is,  of  course,  impossible  to  prevent  all  industrial  acci- 
dents. However  sure  the  precautions,  however  perfect  the 
arrangement,  it  is  inconceivable  that  the  gigantic  industrial 
movements  of  the  American  people  should  be  conducted  with- 
out some  fatalities.  The  industrial  structure  is  a  huge  ma- 
chine, hard  running,  and  with  many  unguarded  parts,  and 
many  of  the  fatalities,  many  of  the  deaths  in  general  are  simply 
and  solely  the  result  of  conditions  beyond  human  control,  and 
inseparable  from  the  ordinary  course  of  existence.  But 
thousands  of  easily  preventable  accidents  and  fatalities  occur 
each  year,  and  it  is  from  these  that  the  wage  earners  strive  to 
secure  relief. 

In  the  United  States  the  number  of  persons  killed  and 
injured  is  not  even  counted,  but  Mr.  William  Hard  credits 
the  American  Institute  of  Social  Service  with  the  statement, 
that  536,165  workmen  are  killed  or  maimed  every  year  in 
American  industry,  while  Dr.  Hoffman  has  estimated  the  an- 
nual number  of  industrial  accidents  at  approximately  2,000,000. 
As  a  matter  of  fact,  however,  the  death  roll  of  industry  is 
longer  than  is  evident  from  official  figures.  No  one  can  com- 
pute, of  course,  the  number  annually  yielding  up  their  lives,  or 


ADDRESS  OF  MR.  JOHN  MITCHELL  45 

compelled  to  become  a  burden  upon  their  friends  or  relatives, 
or  dependent  upon  the  charity  or  munificence  of  society,  who 
have  come  to  their  death  or  disability  as  a  result  of  disease 
contracted  in  their  occupation.  It  is  a  strange  commentary 
upon  our  boasted  American  civilization,  that  in  this  country 
twice  or  three  times  as  many  persons  per  looo  employed,  are 
killed  and  injured  in  the  course  of  their  employment  as  in 
any  other  country  in  the  world. 

It  is  not  my  purpose  to  disparage  the  institutions  of  my 
own  country,  because  I  believe  that  with  all  our  failings,  with 
all  our  sins  of  omission  and  commission,  we  have,  in  many 
respects,  the  best  government  ever  instituted  among  men ;  but, 
I  cannot  blind  myself  to  the  fact  that  in  the  matter  of  providing 
protection  for  the  life  and  safety  of  the  workman,  and  in  com- 
pensating him  for  injury  sustained  in  the  course  of  his  em- 
ployment, we  are  lagging  far  behind  the  nations  of  the  Old 
World.  It  may  be  said  that  this  is  not  a  parental  government, 
and  that  the  State  should  not  be  called  upon  to  regulate  our 
industrial  relations,  and  while  I  agree  that,  "they  are  best 
governed  who  are  least  governed,"  I  contend,  nevertheless, 
that  it  is  a  proper  function  of  the  government  to  throw  around 
the  weakest  of  its  citizens  all  the  safeguards  and  all  the  pro- 
tection possible. 

In  a  letter  to  the  Exposition  of  Safety  Devices  and  In- 
dustrial Hygiene,  Mr.  Roosevelt,  then  President  of  the  United 
States,  expressed  thus  his  view  upon  this  subject:  "As 
modern  civilization  is  constantly  creating  artificial  dangers  of 
life,  limb  and  health,  it  is  imperative  upon  us  to  provide  new 
safeguards  against  the  new  perils.  In  legislation  and  in  our 
use  of  safety  devices  for  the  protection  of  workmen,  we  are 
far  behind  European  peoples,  and,  in  consequence,  in  the 
United  States,  the  casualties  attendant  upon  peaceful  industry 
exceed  those  which  would  happen  under  great  perpetual  war. 
Many,  even  most,  of  these  casualties  are  preventable,  and  it  is 
not  supportable  that  we  should  continue  a  policy  under  which 
life  and  limb  are  sacrificed,  because  it  is  supposed  to  be  cheaper 
to  maim  and  kill  men  than  to  protect  them." 

In  the  matter  of  the  health  and  the  safety  of  the  work- 
men, society  has  not  yet  learned  its  full  lesson.  There  was 
a  time  when  the  criminal  law  was  a  matter  of  private  settlement, 
and  a  man  could  relieve  himself  of  responsibility  for  the  mur- 
der of  his  neighbor  by  making  a  "blood  payment"  of  so  much 


46  ADDRESS  OF  MR.  JOHN  MITCHELL 

money  to  the  kinsmen  of  the  murdered  man.  Our  attitude 
toward  industrial  accidents  is  still  much  the  same.  If  the 
employer  pays  a  ludicrously  inadequate  sum  to  his  injured  em- 
ploye, or  to  the  widow  of  a  workman  who  has  been  killed, 
society  assumes  that  he  has  performed  his  full  duty,  and 
that  his  concern  m  the  affair  has  ceased.  As  a  matter  of  fact, 
most  employers  minimize  their  financial  responsibility  for  the 
death  or  injury  of  their  workmen  by  a  system  of  insurance  in 
Employers  Liability  Companies.  In  consideration  of  the  pay- 
ment of  a  small  fee  for  each  person  employed,  or  a  small 
amount  upon  their  pay  roll,  these  companies  guarantee  to  de- 
fend, in  the  courts,  all  suits  instituted  for  damages,  and  to  pay  to 
the  plaintiff,  in  such  suits,  any  judgment  that  may  be  rendered 
against  the  employer.  Because  of  this  system,  it  is  frequently 
less  expensive  to  permit  a  workman  to  be  killed  or  maimed, 
than  to  provide  adequate  safeguards  against  his  injury. 

Regrettable  and  alarming  as  is  the  number  of  accidents 
attendant  upon  the  peaceful  conduct  of  our  industries,  yet,  we 
might  reconcile  ourselves  to  even  the  conditions  as  they  now 
exist,  if  it  were  not  possible,  by  the  exercise  of  reasonable 
precautions,  to  reduce  the  number  of  industrial  accidents.  But 
when  we  observe  the  contrasts  between  the  number  killed  and 
injured  in  the  industries  of  other  nations  with  that  of  our  own, 
we  are  led  to  the  conclusion,  that,  if  it  cost  more  to  kill  a 
workman  in  America  than  to  protect  him — as  it  does  in 
Europe — the  American  workman  would  not  be  killed,  he  would 
be  protected,  and  the  number  of  industrial  accidents  would  be 
reduced  at  least  one  half.  As  an  illustration  of  what  has  been 
accomplished  in  foreign  countries,  and  as  an  evidence  of  what 
could  be  accomplished  under  proper  regulations  in  the  United 
States,  your  attention  is  directed  to  the  conditions  prevailing  in 
the  mining  industry  of  the  following  countries: 


ADDRESS  OF  MR.  JOHN  MITCHELL  47 

Average  number    Total  number        Death  rate 
men  employed      men  killed.  per  i,ooo 

each  year.  employed. 

India,   79,007  676  0.86 

Austria,    53>794  928  i.74 

Belgium,   132,251  1,401  1.06 

France,    162,917  2,944  1.81 

Prussia,    397,oo2  8,460  2.13 

Great  Britain,   . . .  796,303  10,319  1.29 

United  States,  . . .  544,756  19775  346 

In  considering  these  statistics  it  is  well  to  remember  that 
the  physical  conditions  of  mining  in  the  United  States  are 
not  more  hazardous  than  the  conditions  prevailing  in  the 
countries  of  the  Old  World.  Indeed,  the  natural  conditions 
of  American  mining  are  more  safe  than  are  the  natural  condi- 
tions in  the  countries  enumerated  in  this  table.  Therefore, 
the  disproportionate  number  of  fatal  mining  accidents  in  the 
United  States,  as  against  all  European  nations,  must  be  at- 
tributed to  inadequate  mining  regulations.  It  is,  therefore, 
highly  important  to  the  preservation  of  life  and  the  promotion 
of  health,  that  the  factory  and  mining  laws  of  all  our  States — 
which  at  the  present  time  are  wholly  inadequate — should  be 
greatly  extended,  and  should  be  enforced  with  the  utmost 
vigor.  Manufacturers  should  be  required,  under  pain  of  severe 
penalty,  to  equip  machinery  and  working  places  with  every 
practical  safety  device  that  it  is  possible  to  secure,  and  the 
State  itself  should  establish  museums  of  safety  devices  and  in- 
dustrial hygiene  in  which  should  be  exhibited  drawings  or 
models  of  all  safety  appliances,  that  are  in  use  in  this  and  other 
countries. 

As  a  further  means  of  reducing  accidents,  our  iniquitous 
and  antiquated  liability  laws  should  be  supplanted  by  an  auto- 
matic system  of  compensation  to  workmen  for  losses  caused 
by  industrial  accidents.  If  the  money  now  spent  by  employers 
in  defending  themselves  against  personal  injury  litigation  were 
paid  directly  to  the  injured  workman,  or  to  the  dependents  of 
workmen  who  have  been  killed,  it  would  go  a  long  way  to- 
ward relieving  their  distress,  and  toward  extricating  the  nation 
from  the  disgraceful  and  humiliating  position  it  not  occupies  in 
respect  to  this  question. 


48  ADDRESS  OF  MR.  JOHN  MITCHELL 

The  United  States  is  now  the  only  industrial  nation  on 
earth  that  maintains  the  old  stystem  of  liability  based  upon 
negligence.  We  still  live  under  the  common  law  only  slightly 
modified  by  statute.  This  law  was  evolved  more  than  a  century 
ago,  and  at  a  time  when  there  was  not  a  mine,  mill,  factory 
or  railroad  of  any  importance  in  the  United  States.  The  sys- 
tem may  have  been  just  then,  but  it  is  unjust  now.  We  were 
wholly  an  agricultural  people  one  hundred  years  ago,  we  are 
now  an  industrial  nation,  and  our  machinery  is  more  complex 
than  that  of  any  other  nation  on  earth.  Our  men  work  harder, 
they  live  under  a  severe  nervous  strain.  We  are  a  hetero- 
geneous people.  Hundreds  of  thousands  of  immigrants  come 
to  our  shores  each  year,  we  and  they  work  and  live  together, 
and  it  is  not  to  be  wondered  at  that  we  more  readily  fall 
victims  to  industrial  accidents  and  occupational  diseases  than 
do  the  workmen  in  the  more  slow  going  homogenous  nations 
of  Europe.  Therefore,  we,  even  more  than  they,  require  protec- 
tion against  the  dangers  of  modern  industriaHsm. 

As  a  rule,  an  injured  workman  has  no  remedy  at  law  if 
his  injury  were  caused  by  the  act  of  a  fellow  workman,  or 
if  he  contributed,  in  any  degree,  to  his  own  injury.  In  many 
instances  he  has  no  remedy  at  law  whatever,  because  it  has 
been  held  by  the  courts,  that  the  workman  in  accepting  employ- 
ment assumes  all  the  risk  of  his  work.  The  result  of  all  this 
judge-made  law  has  been  that  the  workman  is  practically  help- 
less, the  employer  is  under  heavy  expense  defending  himself 
in  the  courts,  and  the  courts  of  the  States  and  nation  are 
burdened  beyond  their  capacity  with  litigation,  that  in  every 
other  nation  is  eliminated  because  of  the  automatic  settlement 
of  such  claims. 

I  shall  not  undertake  a  discussion  of  the  laws  of  other 
countries,  because  I  assume  that  the  members  of  your  associa- 
tion are  thoroughly  familiar  with  them;  but  it  may  be  inter- 
esting to  consider  the  expense  and  the  useless  waste  of  money 
which  is  involved  under  our  present  liability  system.  Mr. 
Hard  states  in  his  booklet,  that  in  the  eleven  years,  1894- 1905, 
the  employers  liability  companies  of  America  took  in  99,959,076 
dollars  in  premiums  from  American  employers,  and  that  these 
companies  paid  out  in  the  settlement  of  claims  of  injured 
workmen  43,599,498  dollars,  or  43  per  cent,  of  the  amount  they 


ADDRESS  OF  MR.  JOHN  MITCHELL  49 

took  in.  Of  the  43,599,498  dollars  paid  in  the  settlement  of 
claims  of  injured  workmen,  I  believe  it  is  safe  to  say  that 
35  per  cent,  was  expended  by  the  injured  workmen  in  the 
payment  of  attorneys'  fees  and  court  expenses,  so  that  in  the 
final  analysis,  the  injured  workmen  received  less  than  30,000,000 
dollars  out  of  the  100,000,000  dollars  paid  by  employers  dur- 
ing this  period  in  premiums  to  liability  companies.  Allowing 
$15,000,000  for  expenses  of  administration  and  for  reserve, 
it  would  mean  that  $55,000,000  were  wasted,  worse  than  wasted, 
because  the  money  was  used  in  burdening  our  courts  with  liti- 
gation and  in  delaying  or  defeating  the  settlement  of  claims — 
many  of  them  just  claims — when  it  should  have  been  used 
and  would  be  used  under  a  wise  system  for  the  immediate 
relief  of  the  men  and  their  families,  who  are  the  victims  of 
the  hazard  of  industrial  pursuits. 

I  am  not  prepared  to  say  that  even  though  the  entire 
one  hundred  million  dollars  had  been  paid  directly  to  the  in- 
jured workmen,  that  it  would  have  been  sufficient  to  have 
indemnified  them  for  their  losses ;  but  I  do  believe  that  it  would 
not  have  required  very  much  more  to  have  compensated  them 
on  the  basis  of  the  British  Workmen's  Compensation  Act.  I 
believe  that  industry  should  bear  the  burden  of  the  pecuniary 
loss  sustained  by  workmen  as  a  result  of  industrial  accidents, 
just  as  it  is  now  required  to  repair  its  machinery  and  to  offset 
the  loss  caused  by  depreciation  in  the  value  of  its  plants. 
The  workmen  and  those  dependent  upon  them,  are,  and  will 
be,  under  any  system,  required  to  bear  all  the  physical  pain 
and  mental  suffering.  For  this,  they  cannot  be  reimbursed, 
but  they  should  be  relieved  of  the  harrowing  fear  of  hunger 
and  want,  they  should  be  guaranteed  against  the  humiliation 
and  degradation  of  becoming  objects  of  charity. 

On  the  whole,  it  would  seem  to  me  that  from  every  con- 
sideration of  business  judgment,  economy  and  fair  dealing 
between  man  and  man,  we  should  not  hesitate  longer  in 
abandoning  a  system  that  has  been  productive  of  so  much 
misery  and  injustice,  to  say  nothing  of  the  friction  and  ill  feel- 
ing engendered  between  employer  and  employe.  Under  our 
present  laws  an  injured  workman  is  compelled  to  sue  the  only 
man  on  earth  upon  whom  he  has  a  moral  claim  for  employ- 
ment, whereas  under  a  compensation  system  he  receives  as 


50  ADDRESS  OF  MR.  JOHN  MITCHELL 

a  matter  of  right — not  as  a  benefaction — a  definite  amount 
of  money — a  sufficient  amount  to  tide  him  or  his  dependents 
over  the  period  of  adversity. 

The  law  enacted  by  the  last  legislature  establishing,  in 
the  State  of  New  York,  a  system  of  automatic  compensation 
for  losses  caused  by  industrial  accidents,  is  a  long  and  sub- 
stantial step  in  the  right  direction.  While  this  law  applies  only 
to  a  limited  number  of  extra-hazardous  trades,  yet  when  we 
remember  that  New  York  is  the  first  American  State  to  recog- 
nize legally  the  principles  involved  in  legislation  of  this  char- 
acter, we  have  every  reason  to  feel  encouraged  and  gratified, 
because  there  is  no  doubt  but  that  if  the  constitutionality  of  the 
New  York  Act  is  sustained  by  the  courts,  it  will  only  be  a 
question  of  a  short  time  until  the  principles  embodied  in  the 
law  are  extended  to  all  States  and  broadened  so  as  to  include 
all  wage  earners  engaged  in  the  mining,  manufacturing  and 
transportation  industries. 

I  have  no  hesitancy  in  expressing  the  opinion  that  this 
compensation  act  is  the  most  significant  and  beneficient  piece 
of  legislation  ever  enacted  by  the  Legislature  of  the  State  of 
New  York,  not  because  I  regard  the  law  itself  as  perfect  in 
every  detail,  but  because  it  establishes  a  principle  which  can 
be  developed  into  a  comprehensive,  economical  and  equitable 
legal  system  of  just  compensation  to  workmen  for  losses 
caused  by  industrial  accidents. 


ADDRESS  OF  MR.  MILES  M.  DAWSON  5 1 


Address  of  Mr.  Miles  M.  Dawson 

I  am  honored  to  have  been  invited  to  address  this  com- 
pany of  specialists  upon  casualty  insurance  on  two  subjects 
to  which  I  have  given  much  attention,  without,  however, 
arriving  at  any  final  conclusions  concerning  the  wisdom  of 
this  or  that  course,  especially  in  view  of  the  great  variance  of 
conditions  in  one  country  from  those  in  another. 

Your  chairman  has  asked  me  to  speak  on  two  distinct, 
though  correlated  subjects,  one  being  the  governmental  aspect 
of  what  is  in  other  countries  called  social  insurance,  of  which 
employers*  liability  or  workmen's  compensation  insurance  is 
a  part,  and  the  other  the  actuarial  aspect  of  the  same  subject. 

In  the  leading  European  countries,  as  is  now  well  known, 
within  the  last  twenty-five  years  the  laws  relating  to  the 
liability  of  employers  to  employes  who  are  injured  in  the 
course  of  their  employment,  and  to  the  dependents  of  em- 
ployees who  are  killed  in  the  course  of  employment,  are  upon 
an  entirely  new  basis,  viz.,  not  that  the  employer  should,  as 
an  individual,  pay  for  his  own  negligence  and  not  otherwise, 
but  that  he  should,  as  a  mere  means  of  transferring  all  the 
costs  of  the  product  into  the  price  to  be  paid  by  the  con- 
sumer, reasonably  compensate  all  who  suffer  because  of  acci- 
dents occurring  in  the  course  of  their  employment. 

It  is  customary  in  discussing  legislation  of  this  type  to 
state  the  principle  much  as  I  have  stated  it,  but  the  fact  is  that 
this  is  a  very  incomplete  statement.  If  the  legislation  and  the 
conditions  which  it  produces  were  no  more  than  is  included  in 
that  statement  the  very  thing  upon  which  the  principle  is  based 
would  surely  fail  of  realization;  for  if  employers  did  not  insure 
against  their  risk  under  these  workmen's  compensation  laws 
there  would  be  at  best  a  very  imperfect  distribution  of  the  costs 
of  industrial  accidents,  so  as  to  form  a  part  of  the  price  of  the 
product.     This  may  be  seen  very  readily  by  considering  what 


52  ADDRESS  OF  MR.   MILES  M.  DAWSON 

would  take  place  in  sub-contracting,  where  many  of  the  sub- 
contractors would,  we  will  say,  run  the  risk  themselves,  and 
would  not  take  into  account  this  part  of  the  cost  in  making 
their  bids.  It  would  follow  that  other  contractors  who  did 
wish  to  take  it  into  account  could  not  do  so,  and  that,  therefore, 
the  entire  cost  would  come  out  of  the  profits  of  contractors, 
and  would  not  fall  upon  the  consumer.  Moreover,  a  very  large 
part  of  the  work  is  done  in  the  form  of  service  directly 
performed  for  the  employer,  and  most  frequently  this  likewise 
is  when  there  are  few  employes.  If  in  such  instances  the  em- 
ployers do  not  insure,  it  may  happen,  and  often  will,  that  the 
individual  employer  will  be  heavily  penalized. 

The  fundamentally  correct  principle  perhaps  was  that 
which  was  first  enunciated,  so  far  as  proposed  legislation  is 
concerned,  by  Emperor  William  I  of  Germany,  when,  in  words 
which  were  no  doubt  supplied  by  Bismarck,  he  addressed  the 
Reichstag,  asking  for  legislation  of  this  character.  It  was  his 
proposal,  however,  that  the  entire  cost  of  the  casualties  of  a 
given  group  of  industries  which  are  so  related  that  they  could 
and  should  bear  this  cost  in  common,  should  in  the  first  instance 
be  borne  by  those  industries  through  a  system  of  insurance, 
which,  of  course,  absolutely  assures  that  these  costs  will  enter 
into  the  price  of  the  product  and  be  paid  by  the  consumer. 

Only  in  Austria,  Hungary,  Norway,  Holland  and  Italy  has 
the  German  principle  of  compulsory  insurance  been  accepted, 
and  in  none  of  these  countries  excepting  Hungary  has  it  taken 
a  form  similar  to  that  which  was  introduced  in  Germany. 

In  all  the  countries,  however,  which  have  passed  laws  of 
the  workmen's  compensation  type,  it  has  been  found  in  prac- 
tice that  a  very  large  percentage  are  covered  by  insurance,  vary- 
ing in  number  of  employers  from  50  per  cent,  to  80  per  cent., 
and  in  number  of  employes  reaching  even  as  high  as  90  per  cent. 
Therefore,  in  actual  practice  these  workmen's  compensation 
acts  have  proved  in  effect  to  be  insurance  acts.  This  has  been 
found  to  be  true,  even  when  the  principle  has  been  extended  to 
agricultural  labor  and  to  household  servants,  as  in  Great  Britain. 
The  employers  who  do  not  insure  are  found  in  all  countries  to 
be  in  part  a  considerable  number  of  those  who  have  but  one 
employe,  and  in  part  to  be  a  few  of  the  large  corporations 
which  by  reason  of  the  large  number  of  employes  can  have  a 


ADDRESS  OF  MR.   MILES  M.  DAWSON  53 

reasonably  safe  average  of  loss  without  transferring  their  risks 
to  insurance  companies. 

The  various  attitudes  of  European  governments  toward 
insurance  and  insurance  companies  are  exceedingly  interesting 
and  instructive.  It  will  be  found  that  they  flow  more  or  less 
directly  out  of  the  varying  nature  of  the  workingmen's  com- 
pensation laws  themselves.  They  may  be  recapitulated  as 
follows : 

As  stated,  in  Germany,  Austria,  Hungary,  Norway,  Italy 
and  Holland  there  is  a  compulsory  insurance.  These  countries, 
however,  deal  with  this  subject  in  widely  different  manners,  as 
follows : 

In  Germany  all  of  the  employers  of  a  certain  group  of  in- 
dustries must  be  insured  in  a  mutual  society  conducted  and 
managed  by  themselves.  This  society  has  the  right  to  fix  rates 
of  premiums  for  classes  of  industries,  and  also  for  individual 
industries,  to  inspect,  to  enforce  regulations,  to  pay  claims  and 
its  own  expenses,  including  expenditures  for  prevention,  for 
care  and  cure  of  the  injured,  etc.  During  the  year  the  sums 
required  to  make  these  payments  are  furnished  by  the  State 
savings  bank,  interest  being  charged  for  the  use  of  the  same, 
and  at  the  end  of  the  year  the  actual  cost  is  apportioned  among 
the  members  according  to  the  rates  fixed  by  the  society  itself, 
and  each  member  is  notified  of  the  amount  of  his  assessment. 
If  there  is  any  failure  to  pay  within  the  prescribed  time  the 
State  enforces  payment  in  the  same  manner  as  the  payment  of 
other  taxes. 

Actuarially,  the  German  system  is  also  pure  assessment. 
It  is  so  completely  an  assessment  system  that  there  is  no  attempt 
even  to  collect  within  the  year  (or  for  the  purposes  of  the  year, 
although  at  its  close)  a  sufficient  amount  not  merely  to  pay  the 
portion  of  the  claims  due  to  the  accidents  of  the  year  which 
become  payable  during  the  year,  but  also  to  set  up  a  sufficient 
fund  out  of  the  receipts  for  the  year  to  meet  the  claims  payable 
in  future  because  of  the  accidents  of  that  year.  Instead,  only 
enough  is  asked  for  to  cover  the  payments  actually  made  dur- 
ing the  previous  year,  whether  due  to  accidents  of  that  year, 
or  the  year  before,  or  any  year  previous  thereto.  The  cor- 
rective that  is  applied  is  that  in  order  to  meet  extraordinary 
situations,  such  as  the  prostration  of  industry  by  war  or  panic, 


54  ADDRESS  OF  MR.  MILES  M.  DAWSON 

the  government  insists  upon  a  certain  quota  being  collected  for 
contingency  reserve. 

In  Austria,  under  a  compulsory  insurance  system,  the  gov- 
ernment divides  the  country  into  seven  districts,  each  with  an 
insurance  society  or  fund  governed  in  part  by  employers,  in 
part  by  employes,  and  in  part  by  the  State.  Each  of  these 
societies  covers  all  the  hazards  of  that  district,  and  all  who  are 
obliged  to  insure  must  be  insured  with  the  society  of  the  dis- 
trict in  which  their  business  is  carried  on. 

Actuarially,  the  intention  in  Austria  was  to  collect  premi- 
ums each  year,  which  should  be  large  enough  both  to  cover  the 
payments  of  that  year  in  respect  of  accidents  occurring  in  that 
year,  and  also  to  set  up  "capitalized  values"  sufficient  to  meet 
all  payments  that  would  fall  due  in  future  because  of  accidents 
occurring  in  that  year.  This  has  been  realized  in  but  one  of 
the  seven  district  societies,  and  the  most  important  of  them  are 
impaired  to  an  extent  almost,  if  not  quite,  equal  to  half  the 
reserves  which  they  should  hold. 

In  Hungary,  where  compulsory  insurance  has  but  recently 
been  introduced,  the  system  is  like  that  of  Austria,  in  that  there 
are  two  district  societies  instead  of  separate  mutual  associa- 
tions for  groups  of  similar  industries.  But  actuarially  it  is 
like  that  of  Germany,  in  that,  although  some  reserves  are  to 
be  accumulated  for  emergency  purposes,  the  claims  payable 
are  each  year  paid  from  the  proceeds  of  assessments  levied 
that  year,  without  regard  to  whether  the  claims  arise  from 
accidents  occurring  that  year  or  in  previous  years. 

In  Norway,  where  there  is  also  compulsory  insurance,  in- 
troduced in  1894,  the  system  is  pure  State  insurance.  Every 
employer  must  be  insured  in  the  State  insurance  society,  unless 
specially  excepted  by  the  Storthing.  A  few  such  exceptions 
have  been  made,  as,  for  instance,  the  State  railways,  which 
have  a  system  of  their  own. 

As  in  Austria,  the  Norwegian  Government  Insurance  De- 
partment has  aimed  at  collecting  premiums  sufficient  in  amount 
to  pay  each  year  the  claims  arising  out  of  accidents  occurring 
that  year  which  are  payable  during  the  year,  and  also  to  set  up 
"capitalized  values"  for  all  claims  arising  out  of  accidents 
occurring  that  year  which  become  payable  in  the  future.  The 
Norwegian  department  has  succeeded  much  better  than   the 


ADDRESS  OF  MR.   MILES  M.  DAWSON  55 

district  societies  in  Austria.  There  was  a  small  deficiency  at 
one  time — about  $100,000  in  amount — to  cover  which  an  appro- 
priation was  made  but  not  all  of  this  appropriation  proved  to 
be  required.  At  the  present  time  the  department  is,  in  fact, 
strengthening  its  reserves  out  of  current  salvages.  This  it  is 
doing  for  the  reason  that  the  mortality  table  used  for  measur- 
ing the  lives  of  the  totally  disabled  has  proved  unreliable,  the 
experience  of  the  Norwegian  department  having  been  that 
the  totally  and  permanently  disabled,  omitting  the  first  few 
months  of  disability,  are  quite  as  long-lived  as  the  average  of 
the  Norwegian  population. 

In  Italy,  where  there  is  also  compulsory  insurance,  there  is 
free  choice  of  companies.  Under  these  circumstances  it  would 
hardly  do  for  the  Government  to  require  all  employers  to  in- 
sure, unless  it  furnished  some  institution  in  which  they  must 
be  insured  if  not  insured  elsewhere,  and  unless  also  such  insti- 
tution were  ready  to  accept  all  employers  who  might  be  refused 
insurance  elsewhere.  Such  an  institution  has  been  set  up  in 
Italy  through  the  influence  of  the  Government.  It  is  conducted 
on  the  mutual  plan,  and  aims  at  maintaining  solvency  on  a 
"capitalized  values"  basis.  This  company  has  a  large  share  of 
the  Italian  business 'naturally,  but  by  no  means  all,  and  private 
companies  have  competed  with  it  successfully. 

In  Holland  there  is  a  peculiar  sort  of  State  insurance,  viz., 
the  State  has  set  up  an  insurance  institution  in  which  everybody 
is  considered  to  be  insured.  This  institution  adjusts  all  losses 
and  sets  up  reserves  for  all  deferred  payments  and  particularly 
for  all  annuities,  for  widows,  orphans  and  the  permanently  dis- 
abled. In  case  the  employer  does  not  insure  elsewhere,  thus 
rendering  the  other  insurance  company  liable  to  make  good  all 
payments  which  the  State  Insurance  Department  may  make  on 
his  account,  and  all  reserves  which  it  may  set  up  to  cover  future 
payments  to  be  made  on  his  account,  the  employer  must  pay  to 
the  State  Insurance  Department  the  premium  which  it  fixes  as 
the  proper  one  for  his  establishment.  He  may,  however,  pay  a 
premium  to  any  insurance  company  doing  business  in  Holland 
which  will  conform  to  the  requirements  of  the  State,  and  which 
will  promise  to  indemnify  the  State  Insurance  Department  for 
all  payments  which  it  may  make  and  all  reserves  which  it  may 
set  up.  The  private  companies,  which,  notwithstanding  these 
conditions,  are  successfully  competing  with  the  State  Insurance 


56  ADDRESS  OF  MR.   MILES  M.  DAWSON 

Department  in  Holland,  must  also  make  deposits  with  the  de- 
partment to  secure  that  they  will  carry  out  their  agreement, 
upon  which  deposits  it  may  draw  as  the  money  may  be  required, 
and  they  must  contribute  toward  the  payment  of  the  expenses 
of  the  State  Insurance  Department  as  that  department  may 
determine. 

In  Denmark,  where  they  do  not  have  compulsory  insurance, 
the  State,  as  in  Holland,  adjusts  all  claims  and  determines  the 
amount  to  be  paid.  It  does  not  permit  employers  or  insurance 
companies  to  make  these  adjustments  for  themselves.  Under 
these  conditions  likewise,  which  were  at  first  very  much  re- 
sented, private  insurance  companies,  both  mutual  and  stock,  are 
thriving. 

In  Sweden  the  law  does  not  require  the  employer  to  insure ; 
but  notwithstanding  a  State  insurance  department  has  been  set 
up  and  a  leading  and  able  casualty  man  has  been  put  in  charge 
of  it.  This  department  is  required  to  accept  all  risks  which 
offer.  In  consequence,  the  private  companies  have  weeded  out 
the  poorer  risks,  and,  notwithstanding  that  the  State  depart- 
ment is  so  favored  by  the  Government  that  all  its  expenses  of 
whatever  character  and  nature,  including  commissions  of  6 
per  cent,  on  the  premiums,  are  paid  by  the  State  out  of  the 
proceeds  of  general  taxation,  some  of  the  private  companies 
have  fairly  held  their  own  and  made  money.  There  is  no  pro- 
vision in  Sweden,  as  in  Denmark,  for  the  State  department's 
adjusting  all  claims,  but  as  its  adjustments  are  of  a  fixed  and 
almost  arbitrary  character,  well-known  throughout  the  country, 
it  is  difficult  for  the  private  companies  to  adjust  a  claim  at  a 
less  amount.  There  is  no  requirement  as  in  Holland  that  the 
private  companies  deposit  with  the  State  department  money  to 
assure  the  payment  of  claims  falling  due  in  the  future,  but 
arising  out  of  accidents  taking  place  presently ;  but  the  oppor- 
tunity is  given  to  the  companies  to  purchase  such  annuities  if 
they  choose,  and  it  is  very  generally  availed  of  by  the  private 
stock  companies,  especially  when  the  injury,  though  disabling, 
is  such  that  they  do  not  think  it  will  materially  shorten  life. 

In  France  there  is  also  a  State  insurance  department,  but 
with  free  choice  of  companies,  and  without  employers  being 
obliged  to  insure.  The  State  Insurance  Department  has  about 
I  per  cent,  of  the  business  only.     It  is  not  permitted  to  cover 


ADDRESS  OF  MR.  MILES  M.  DAWSON  57 

temporary  disabilities,  which  fact  has  proved  a  great  handicap. 
It  must  also  accept  all  who  apply,  and  it  would  seem  from  the 
high  rates  which  it  has  found  necessary  to  charge,  that  it  has 
been  made  a  target  for  poor  risks  which  were  either  refused 
insurance  by  the  private  companies,  or  heavily  penalized  in 

rates. 

As  in  Sweden,  the  Government  also  offers  to  French  com- 
panies the  privilege  of  purchasing  the  annuities  to  cover  their 
liability  for  pensions  to  the  permanently  disabled,  or  widows, 
or  orphans;  and  this  is  often  taken  advantage  of,  the  rates 
offered  by  the  Government  being  attractive,  and  involving  a 
considerable  loss. 

There  is  one  remarkable  thing  in  France,  viz.,  that  while 
the  Government  does  not  compel  employers  to  insure  at  all,  and 
much  less  to  insure  with  it  in  the  first  instance,  it  does  require 
all  employers  to  pay  a  small  tax  into  a  Government  fund  which 
guarantees  the  payment  of  benefits  to  workmen  or  their  de- 
pendents in  event  the  employer  or  the  company  in  which  he  is 
insured  fails.  France  also  completely  releases  the  employer 
from  liability  in  event  he  is  insured  in  a  French  company  regu- 
larly licensed  to  do  business. 

In  Belgium,  as  in  France,  a  Government  department  has 
the  right  to  insure  employers  against  their  risk  under  the  work- 
men's compensation  act.     This  power,  however,  was  given  in 
Belgium  to  a  department  which  is  already  a  State  savings  bank, 
a  State  life  insurance  company  and  a  State  annuity  fund,  and 
is  very  successful  in  all  of  these  branches,  besides  doing  much 
to  encourage  the  building  of  workmen's  houses  to  be  sold  to 
them  on  the  instalment  plan.     This  department  has  no  work- 
men's compensation  insurance  whatever,  its  manager  believing 
that  to  engage  in  a  business  which  would  call  for  close  and 
careful  adjustment  of  workmen's  claims  would  prejudice  all 
the  other  branches  of  its  business,  which  are  conducted  chiefly 
for  the  benefit  of  workingmen  and  their  families. 

As  in  France,  if  the  employer  insures  in  a  Belgian  com- 
pany, duly  licensed  to  do  business  in  that  country,  he  is  re- 
lieved from  liability.  He  may  insure  in  a  foreign  company  if 
he  chooses,  but  in  such  case  he  would  continue  to  be  liable  in 
case  the  company  failed  to  fulfil  its  obligations. 

In  Great  Britain,  as  in  Denmark,  there  is  no  State  insur- 


58  ADDRESS  OF  MR.  MILES  M.  DAWSON 

ance  of  employers  against  their  risks  under  the  workmen's  com- 
pensation act,  but  as  in  Sweden  and  in  France  the  Government 
does  permit  private  companies,  if  they  choose  to  do  so,  to  re- 
lieve themselves  from  liability  by  purchasing  annuities  from  a 
government  department,  covering  payments  to  be  made  in  the 
future  because  of  accidents  which  have  occurred  presently. 
The  terms  upon  which  such  an  annuity  is  bought  in  Great 
Britain  are  that  the  single  premium  therefor  shall  be  three- 
fourths  of  the  premium  charged  in  the  Government  Annuity 
Department  for  a  life  annuity  when  purchased  directly.  The 
idea  is  that,  roughly,  the  totally  and  permanently  disabled 
will  not  average  by  one- fourth  to  live  so  long  as  the  healthy 
persons  who  come  forward  to  buy  annuities.  Companies  must 
in  any  event  report  reserves  computed  on  this  basis,  but  not 
as  a  liability. 

In  Great  Britain,  when  the  workmen's  compensation  act 
took  effect  in  1897,  it  was  fully  expected  that  establishment 
funds  or  mutual  associations  to  which  both  employers  and  em- 
ployes contributed,  would  prove  to  be  the  cheapest  and  most 
satisfactory  method  of  insuring  the  risks  imposed  by  the  act. 
This  has  not  proved  wholly  true,  which  fact  is  not  attributed 
so  much  to  any  want  of  economy  or  dissatisfaction  with  these 
establishment  funds,  either  on  the  part  of  their  members  or 
the  employers,  as  to  the  fact  that  whatever  difficulties  have 
arisen  have  become  very  widely  known,  while  the  merits  and 
virtues  have  not  been  widely  heralded.  At  the  same  time,  these 
establishment  funds  have  been  used  by  some  employers  as  a 
weapon  to  break  down  labor  unions,  so  that  the  sentiment  of 
the  trade  unions  of  Great  Britain  has  been  adverse,  and  fre- 
quently severely  adverse.  Moreover,  since  these  establishment 
funds  must,  according  to  the  terms  of  the  act,  have  adequate 
rates  and  be  maintained  solvent  at  all  times,  they  have  not  been 
so  attractive  to  employers.  This  brings  me  to  one  of  the  most 
interesting  features  of  workmen's  compensation  insurance  as 
carried  on  by  mutual  societies,  which  is  that  employers  virtu- 
ally everywhere  resist  to  the  last  degree  the  payment  of  premi- 
ums large  enough  both  to  meet  the  current  disbursements  in 
payment  of  claims  and  to  set  up  "capitalized  values"  to  cover 
claims  payable  in  the  future  because  of  accidents  which  have 
occurred  presently. 


ADDRESS  OF  MR.  MILES  M.  DAWSON  59 

Undoubtedly,  their  resistance  was  one  of  the  reasons  why 
the  German  system  was  estabHshed  on  the  assessment  plan, 
though,  of  course,  in  view  of  the  fact  that  compulsion  really 
takes  the  place  of  reserve,  because  the  purpose  of  a  reserve  is 
to  assure  the  payment,  and  the  compulsion  of  itself  assures 
the  payment,  it  is  doubtless  true  that  the  great  imperial  Chan- 
cellor had  in  mind  the  advantages  that  might  accrue  to  German 
industries  if  this  burden  were  imposed  upon  them  gradually, 
instead  of  the  full  burden  at  one  time. 

In  Austria,  as  has  been  seen,  the  resistance  of  the  employ- 
ers has  been  so  potent  that  the  mutual  district  societies  are, 
with  one  exception — and  that  by  no  means  one  of  the  most  im- 
portant districts — heavily  impaired.  In  Hungary,  which  is  un- 
der the  same  crown,  their  influence  has  been  strong  enough  to 
cause  the  system  to  be  modelled  on  that  of  Germany,  neglecting 
entirely  to  set  up  "capitalized  values.'* 

In  countries  such  as  Sweden,  where  there  is  no  require- 
ment that  reserves  fully  equal  to  the  capitalized  values  be  set 
up,  it  is  found  that,  while  the  State  department,  as  a  matter 
of  course,  and  the  better  of  the  private  stock  companies,  amply 
secure  their  claims  by  means  of  adequate  reserves,  the  mutual 
associations  of  employers  as  a  class  hold  much  lighter  reserves, 
and  quite  a  number  of  them  of  the  inter-insurance  type  hold 
very  small  reserves,  asserting  that  they  need  no  reserve,  and 
that  all  the  group  of  employers  is  doing  is  to  go  without  in- 
surance and  average  up  their  losses.  This  plausible  but  falla- 
cious argument  is  sufficient  to  excuse  their  laxity — to  them- 
selves, at  least. 

The  same  phenomenon  is  found  in  other  countries.  It 
would  not  be  fair  to  say  that  it  is  absolutely  without  exception, 
because  unquestionably  some  of  the  voluntary  mutual  societies 
are  conducted  with  exemplary  prudence,  and  do  maintain  as 
large  reserves  as  in  the  judgment  of  the  trained  actuaries  asso- 
ciated with  them  are  absolutely  necessary.  But  even  in  these 
the  tendency  to  keep  the  reserves  down  to  the  lowest  point  be- 
lieved to  be  absolutely  necessary  is  marked,  and,  indeed,  the 
pressure  for  greater  economy  of  cost  may  be  said  invariably  to 
take  this  form  in  mutual  associations  of  employers,  which  is 
decidedly  dangerous  when  insurance  in  them  is  not  compulsory. 
Laxity  on  this  point,  however,  is  not  confined  to  mutual  associa- 


6o  ADDRESS  OF  MR.   MILES  M.  DAWSON 

tions,  but  in  countries  where  strict  standards  of  adequacy  and 
solvency  are  not  enforced  there  is  a  strong  disposition  on  the 
part  of  some  of  the  stock  companies  likewise  to  hold  reserves 
which  may  or  may  not  be  sufficient.  It  ought  not  to  be  so 
difficult  to  determine  within  reasonable  limits  what  reserves 
are  required  under  a  workmen's  compensation  act,  even 
though  benefits  *be  payable  in  the  form  of  pensions  or 
annuities,  for  all  that  is  necessary  is  to  ascertain  the  fair 
present  value  of  these  pensions  and  charge  the  same  as 
a  liability.  It  will  be  seen,  therefore,  that,  furnished  proper 
tables  of  mortality  and  making  proper  assumptions  as  to  future 
interest,  the  amount  of  reserve  required  may  be  computed  with 
great  accuracy.  The  problems  are  not  nearly  so  serious,  for 
instance,  as  are  those  of  setting  up  ample  employers'  liability 
insurance  reserves  under  the  existing  laws  of  most  of  the  States 
of  the  United  States,  because  in  determining  what  reserves 
each  company  shall  carry  we  are  dealing  chiefly  with  the  uncer- 
tain questions  involved  in  litigation,  of  which  the  two  most  im- 
portant are,  first,  is  the  company  liable  at  all,  and,  second,  if 
so,  for  what  amount?  Under  workmen's  compensation  acts 
both  of  these  questions  are  supposed  to  be  settled  promptly, 
and  the  sole  thing  required  in  order  to  fix  the  amount  of  the 
reserve  is  to  ascertain  within  reasonable  limits  the  duration  of 
the  lives  of  the  disabled,  and  of  widows  and  orphans. 

The  question  arises  very  naturally  as  to  what  attitude 
ought  the  Government  of  the  United  States  or  the  various  State 
governments  to  take  toward  insurance  under  workmen's  com- 
pensation acts.  Doubtless  there  will  be  found  persons  who  will 
argue  in  favor  of  one  or  another  of  these  systems.  Clearly,  if 
the  system  of  Germany  or  the  system  of  Norway,  for  instance, 
were  introduced  the  solution  would  be  very  thorough  and  com- 
plete. Among  the  arguments  in  favor  of  doing  this  will  prob- 
ably be  found  the  proposition  that  such  a  system  might  be 
nation-wide,  and  that  therefore  a  large  saving  might  be  eflFected 
by  avoiding  the  creation  of  an  enormous  army  of  agents  with 
commission  payments  to  them  of  lo  or  even  15  per  cent,  of  the 
premiums  involving  perhaps  a  charge  upon  industry  of  at  least 
$30,000,000  per  annum  for  commissions  alone.  Similar  argu- 
ments will  doubtless  be  advanced  for  State  insurance,  though 
confined  to  a  single  State,  and,  indeed.  State  insurance,  on  a 


ADDRESS  OF  MR.   MILES  M.  DAWSON  6l 

compulsory  basis  at  that,  was  already  a  fait  accompli,  so  far  as 
mining  is  concerned,  in  the  State  of  Montana  before  any  other 
State  had  passed  an  act  which  in  any  way  recognized  the  prin- 
ciple of  workmen's  compensation. 

Notwithstanding  this,  it  is  perhaps  improbable  that  in  our 
country  a  system  of  State  insurance,  or  even  of  compulsory 
mutual  insurance  will  soon  be  introduced.  It  is  wildly  im- 
probable that  a  system  such  as  in  Sweden  or  Denmark,  under 
which  a  State  insurance  department  is  competing  with  private 
companies,  will  be  introduced,  and  there  is  no  great  probability 
that  there  will  be  a  widespread  call  for  any  system  of  the  State 
guaranteeing  that  claims  will  be  met  whenever  employers  or 
the  companies  in  which  they  are  insured  become  insolvent,  as 
is  the  law  of  France. 

It  seems,  therefore,  much  more  probable,  and  by  many  it 
is  believed  to  be  absolutely  called  for  by  the  genius  of  our  insti- 
tutions, that  the  workmen's  compensation  acts  in  this  country 
should  take  the  form  of  merely  holding  the  employers  liable, 
and  definitely  fixing  the  limits  of  their  liability,  and  then  per- 
mitting them  to  insure  or  not,  as  they  please,  and  in  such  com- 
panies or  societies  as  they  please.  If  this,  which  is  precisely 
what  has  been  done  in  New  York,  which  has  alone,  so  far,  pro- 
vided directly  for  the  application  of  the  principle  of  workmen's 
compensation,  is  to  be  the  policy  throughout  the  country,  then  it 
is  respectfully  suggested  that  it  should  be  accompanied  by  pro- 
visions as  follows: 

First. — Requiring  the  maintenance  of  absolute  solvency  on 
the  part  of  the  stock  companies  and  the  voluntary  mutual  asso- 
ciations of  employers  which  cover  this  risk.  To  assure  this 
solvency  proper  standards  should  be  determined  upon  and  set 
up,  and  it  seems  to  me  that  mutual  companies  should  also  be 
required  to  deposit  from  time  to  time  with  the  State,  assets 
sufficient  in  amount  to  cover  the  capitalized  values  of  all  pay- 
ments to  fall  due  in  future  because  of  accidents  which  have 
already  occurred.  Stock  companies  should  likewise  be  held  up 
to  the  same  standards,  but  provided  they  maintain  themselves 
amply  and  abundantly  solvent,  perhaps  deposits  may  not  be 
necessary. 

Second. — Provision  should  be  made  for  definitely  encour- 
aging the  taking  of  insurance.    This  can  be  done  by  providing 


62  ADDRESS  OF  MR.  MILES  M.  DAWSON 

in  the  law  that  the  employer  is  entirely  relieved  of  liability  if  he 
insures  in  a  company  or  association  licensed  to  do  business  in 
the  State,  and  also  that  he  may  insure  his  employes  against  acci- 
dents of  all  kinds,  including  those  which  do  not  arise  in  the 
course  of  the  employment,  as  well  as  those  which  do  so  arise, 
and  that  in  such  case  he  may  collect  a  certain  portion  of  the 
premiums  by  deducting  the  same  from  the  wages  of  the  em- 
ployes. It  would  be  well  also  as  a  further  inducement  to  permit 
employers  to  insure  employes  against  both  sickness  and  accident, 
and  possibly  also  death  from  any  cause,  making  proper  deduc- 
tions from  the  wages  of  the  employes  in  sums  not  exceeding 
the  excess  of  the  cost  of  this  insurance  over  the  cost  and  value 
of  insurance  of  the  benefits  under  the  workmen's  compensation 
act. 

Under  such  conditions,  definitely  encouraging  the  taking  of 
insurance,  it  is  probable  that  almost  all  the  employers  would 
protect  themselves  and  thereby  the  workmen,  their  dependents, 
and  thus  society  itself,  against  disasters  which  will  at  times 
overwhelm  employers  if  made  liable  under  workmen's  com- 
pensation acts  and  not  so  protected  by  insurance. 


ADDRESS  OF   MR.   P.   TECUMSEH   SHERMAN  63 


Address  of  Mr.  P.  Tecumseh  Sherman 

Mr.  Chairman  and  Gentlemen:  I  presume  that  there 
is  no  difference  of  opinion  among  us  as  to  the  correctness 
in  general  of  the  conclusions  reached  by  the  preceding 
speakers.  But  the  difficulties  and  differences  arise  when  we 
try  to  formulate  a  compensation  law  for  this  country. 

As  I  understand  it,  or  as  I  believe,  the  desiderata  of  a 
good  compensation  law  are  very  numerous.  In  the  first 
place  it  should  assure  to  all  employees  in  hazardous  indus- 
tries some  certain,  sure  and  prompt  relief  for  all  injuries, 
which  arise  or  occur  therein  through  any  other  causes  than 
their  own  moral  fault.  In  the  second  place,  it  should  free 
employers  from  the  liability  to  verdicts  for  unliquidated 
damages  where  they  are  not  morally  at  fault,  and  it  should 
free  them  from  liability  to  fake  claims,  and  it  should  dis- 
tribute the  money  which  they  pay  out  on  account  of  acci- 
dents amongst  the  injured  people  without  wasting  so  much 
of  it  in  litigation,  as  occurs  under  the  present  system.  It 
should  also  in  some  way,  clarify  the  problem  of  the  pre- 
vention of  accidents,  and  not  obscure  it, — as  does  our  pres- 
ent law  by  making  both  the  employers  and  the  injured  em- 
ployees hide  and  falsify  the  evidence  as  to  the  causes  of 
accidents.  It  should  also  reduce  the  volume  of  litigation 
on  the  subject  of  accidents,  which  at  present  is  a  heavy 
burden  upon  the  public.  It  should  also  establish  a  liabil- 
ity which  is  fairly  and  reasonably  insurable.  And,  finally, 
it  must  be  constitutional. 

Now,  can  we  draft  a  bill  or  a  law  at  once  which  will 
accomplish  all  these  purposes?  I  am  afraid  that  we  can  not. 
We  can  not  satisfy  all  these  wants  at  once.  We  will  have 
to  take  some  intermediate  step.  But  how  far  towards  the 
ideal  should  the  first  compensation  laws  of  our  various 
States  go?  And  what  is  the  form  of  the  ideal  law  which 
we  should  seek  as  an   object?     The   New   York   law,   with 


64  ADDRESS  OF  MR.   P.   TECUMSEH   SHERMAN 

which  most  of  you  are  familiar,  is,  of  course,  only  a  halting 
step  in  the  right  direction.  It  not  only,  as  Mr.  Mitchell 
says,  declares  a  great  and  true  principle;  but  it  will  also  be 
useful  as  a  feeler  on  the  question  of  constitutionality.  Yet 
it  does  not  comply  with  many  of  the  requirements  of  a  just 
and  complete  compensation  law.  Now,  speaking  for  my- 
self alone,  and  not  for  any  committee  that  I  happen  to  be 
a  member  of,  I  would  like  to  present  to  you  some  of  the 
questions  that  arise  in  drafting  or  formulating  a  compen- 
sation law  and  to  express  my  opinions  as  to  how  it  should 
be  formulated, — wishing  you  to  understand,  however,  that 
on  every  one  of  these  questions  there  are  serious  differ- 
ences of  opinion. 

The  first  proposition  I  advance  is,  that  a  compensation 
law  should  fix  a  legal  liability  in  all  employments  to  which 
it  applies ;  that  it  should  not  leave  it  optional  to  the  em- 
ployer to  adopt  the  liability  for  compensation  as  a  substi- 
tute for  the  liability  for  tort,  as  we  call  the  existing  liabil- 
ity. The  next  proposition  is  that  the  first  form  of  a  com- 
pensation law  should  apply  only  to  those  industries  which 
are  in  fact  comparatively  hazardous.  I  would  determine 
the  question  of  comparative  hazard  according  to  your  in- 
surance tables,  adopting  any  fair  rate  of  risk  as  a  standard, 
and  applying  the  liability  for  compensation  to  all  general 
industries  in  which  the  rate  exceeds  that  standard.  Now, 
there  is  a  very  strong  feeling  that  compensation  should 
be  applied  to  all  employments.  I  do  not  believe  in  that 
myself,  neither  as  an  ultimate  goal  nor  as  a  first  step.  I 
approach  this  subject  from  the  standpoint  of  the  factory 
inspector,  because  I  was  at  one  time  Commissioner  of  Labor 
of  this  State,  in  charge  of  its  factory  inspectors,  and  it  was 
there  that  I  first  came  upon  this  problem.  And  I  arrived  at 
my  opinions  in  this  way: — When  you  study  the  causes  of 
accidents  in  industries,  you  find  that  our  law  practically 
assumes  that  every  accident  is  due  either  to  the  fault  of 
the  employer  or  the  fault  of  the  employee  injured;  and  to 
determine  liability  you  investigate  and  find  out  which  one 
was  at  fault.  If  the  employee  injured  was  at  fault  there 
is  no  liability  on  the  employer's  part.    If  the  employer  was 


ADDRESS  OF  MR.  P.  TECUMSEH   SHERMAN  65 

at  fault,  then  he  is  liable  for  full  legal  damages,  that  is, 
for  the  money  loss,  and  for  some  compensation  for  the  suf- 
fering of  the  injured  employee.  But  when  we  investigate 
the  causes  of  accidents  we  are  led  to  believe  that  no  very 
large  proportion  of  accidents  are  due  to  a  moral  fault  or 
neglect  or  wrong  on  the  part  of  the  employer  or  of  the  em- 
ployees injured;  but  that  a  vast  majority  of  accidents  in 
the  hazardous  industries  are  due  to  trade  risks,  that  is, 
to  specific  causes  of  danger  inherent  in  the  business.  Now, 
the  law  which  we  have  been  working  under  places  the  bur- 
den of  those  accidents  on  the  employees.  They  assume  all 
those  risks.  The  principal  purpose,  then,  of  a  compensation 
law,  is  to  place  the  burden  of  those  risks  in  those  indus- 
tries on  the  industry  and  to  relieve  the  injured  employees. 

A  constitutional  danger  would  also  be  incurred  if  we 
should  extend  the  application  of  a  workmen's  compensation 
law  to  all  employments.  I  do  not  think  that  it  would  be 
constitutional  to  provide  that  the  employer  should  be  liable 
as  an  insurer  to  the  employee,  merely  because  he  is  an  em- 
ployer. If  I  should  hire  any  one  of  you  to  do  something, 
I  should  not,  therefore,  be  liable  for  all  his  accidents  of  life. 
If  you  in  turn  hire  me,  you  should  not  be  liable  to  me  for 
all  my  accidents  of  life.  We  are  trying  to  apply  a  remedy 
in  those  industries  wherein  the  accidents  caused  by  the  in- 
dustry are  really  a  great  burden  on  the  workingman.  So, 
whether  we  shall  eventually  go  further  or  not,  the  first  step 
should  be  to  cover  those  great  industries  in  which  acci- 
dents due  to  the  risks  of  the  business  are  common. 

My  next  proposition  is  that  the  liability  should  apply 
only  to  accidents  in  the  employers'  trade  or  business.  That 
is,  if  you  contract  with  some  independent  contractor  to  do 
something  for  you,  you  should  not  be  liable  for  an  acci- 
dent to  his  workmen.  It  is  not  your  business ;  it  is  his 
business.  And  if  you  simply  employ  one  man  to  come  in 
and  mend  the  roof  of  your  house,  you  should  not  be  liable 
to  him  for  any  accident,  because  it  is  not  your  business  to 
mend  roofs — it  is  his  business.  He  knows  how  to  do  it 
safely  and  how  to  do  it  unsafely.  He  is  morally  responsible 
and  not  you.  And  the  same  is  true  about  chaulTeurs  who 
are  not  employed  in  the  employer's  trade  or  business.     It 


66  ADDRESS  OF   MR.   P.   TECUMSEH    SHERMAN 

is  going  too  far  to  ask  an  employer  to  insure  all  his  serv- 
ants against  all  their  own  faults — even  if  they  get  drunk 
outside  of  his  jurisdiction  and  not  under  his  control.  It  is 
the  employer's  business  only  to  render  conditions  safe  in 
his  businss  and  to  exercise  discipline  and  to  provide  means 
of  safety  in  that  business;  but  when  it  comes  to  all  the 
relations  of  life,  we  do  not  think  that  it  is  an  expedient  first 
step,  at  any  rate,  to  make  all  employers  liable  as  insurers 
to  all  employees. 

The  next  serious  question  that  arises  is,  shall  employ- 
ers, in  the  industries  to  which  the  compensation  law  shall 
apply,  be  liable  for  compensation  for  all  accidents  arising  in 
those  industries  in  the  course  of  the  employment,  or  shall 
they  be  liable  only  for  accidents  arising  in  hazardous  occu- 
pations therein,  or  only  for  those  accidents  due  to  trade 
risks  or  the  faults  of  others.  You  can  see  that  point  illus- 
trated in  the  New  York  law.  That  law  says  that  the  em- 
ployer shall  be  liable  for  compensation  only  for  accidents 
in  the  course  of  the  employment  arising  out  of  certain 
causes.  Those  causes  are,  negligence  of  fellow  servants; 
inherent  risks  of  the  business,  and  negligence  of  em- 
ployer. The  objections  to  that  law  are  that  it  will  bring 
up  in  court,  every  time,  the  question  of  the  cause  of  the 
accident.  And  that  will  continue  the  problem  of  tracing 
accidents  to  their  causes ;  and  when  you  try  to  trace  an  acci- 
dent to  a  trade  risk  or  to  negligence,  you  encounter  the 
question — what  is  a  trade  risk  and  what  is  negligence? 
Now,  I  have  been  studying  the  law  of  negligence  for  about 
twenty  years,  and  I  have  been  studying  trade  risks  for 
about  five  years ;  and  I  can't  find  any  practical  definition  of 
either.  What  constitutes  a  trade  risk?  What  is  a  trade 
risk?  A  risk  of  the  business;  but  that  is  very  hard  to  de- 
fine. The  Austrian  factory  inspectors  say  that  seventy  per 
cent,  of  accidents  in  factories  are  due  to  trade  risks,  to 
risks  inherent  in  the  business.  The  German  tables  say 
forty  per  cent.  Some  American  investigators  say  twenty- 
five  per  cent.  These  differences  do  not  mean  that  the  acci- 
dents from  trade  risks  have  arisen  in  those  diflFerent  coun- 
tries in  different  proportions.  They  mean  simply  that  these 
different  people  have  each  taken  a  different  idea  of  trade 


ADDRESS  OF  MR.  P.  TECUMSEH   SHERMAN  6/ 

risks.  If  we  enact  a  law  limiting  the  liability  to  accidents 
due  to  the  negligence  of  the  employer,  to  the  negligence 
of  a  fellow  servant  or  to  trade  risks,  we  will  have  one 
court  taking  one  view  of  what  constitutes  trade  risks  and 
negligence,  and  another  court  taking  another;  and  you  may 
find  as  a  consequence  a  very  large  proportion  of  accidents 
which  should  be  compensated  for,  ruled  out  by  a  hostile 
court  or  by  a  court  which  does  not  understand  the  objects 
of  a  compensation  law. 

The  second  alternative  to  making  the  liability  for  compen- 
sation apply  to  all  accidents  in  the  industries  to  which  the  law 
is  made  to  apply,  is  to  enumerate  the  specific  dangerous  em- 
ployments or  tasks  in  those  industries,  to  which  alone  the  liabili- 
ity  shall  apply.  No  such  enumeration  is  practically  possible. 
Take  the  railroad  business.  What  part  of  the  tasks  are  danger- 
ous and  what  part  of  the  tasks  are  not?  Apply  that  question 
through  all  the  hazardous  industries  and  try  to  classify  their 
dififerent  occupations  according  to  that  standard,  and  you  will 
arrive  at  simply  endless  confusion.  I  do  not  know  anybody 
who  has  the  practical  knowledge  to  make  such  a  classification. 

So  we  are  forced  to  the  conclusion  that  we  should  follow 
the  English  law  and  make  the  liability  of  the  employer  for  com- 
pensation apply  to  practically  all  accidents  occurring  in  the  in- 
dustries to  which  the  act  shall  apply.  But  there  are  dangers 
and  objections  also  to  that  course.  The  first  objection  is  that 
it  would  bring  out  a  great  many  border  line  cases,  which 
would  seem  to  render  the  law  absurd.  If  we  should  say  that 
the  employer  in  the  railroad  industry  shall  be  liable  for  all 
accidents  arising  in  the  course  of  that  employment,  then  some 
man  in  the  office  might  happen  to  run  the  end  of  a  pair  of 
scissors  into  his  eye,  and  the  employer  would  be  liable.  That, 
of  course,  would  be  a  ridiculous  application  of  the  law;  but 
such  applications  would  be  very  rare.  Another  illustration  of 
the  effect  of  such  a  provision,  and  an  actual  illustration,  arose 
in  England,  where  a  railroad  paymaster  (I  suppose  many  of 
you  know  the  case)  was  traveling  with  money  in  the  service 
of  the  company  that  employed  him,  and  while  so  traveling 
with  the  money  he  was  murdered  and  robbed.  The  English 
court  held  that  his  death  was  an  accident  arising  out  of  and 
in  the  course  of  employment  and  that  the  employer  was  liable 


68  ADDRESS  OF  MR.  P.  TECUMSEH   SHERMAN 

for  compensation.  But  in  spite  of  the  fact  that  it  would 
sometimes  result  in  undesirable  or  doubtful  applications  of 
the  law,  the  liability,  it  seems  to  me,  should  depend  simply  on 
the  fact  that  the  accident  occur  in  the  course  of  the  employer's 
business.  That  would  eliminate  many  difficult  questions  which 
lead  to  a  large  amount  of  litigation.  But  as  against  this  con- 
clusion it  is  further  objected  that  there  is  a  serious  constitu- 
tional danger  in  making  the  employer  liable  for  all  injuries  oc- 
curring in  the  course  of  the  employment.  There  was  a  case 
recently  in  the  United  States  Circuit  Court,  in  the  West,  where 
the  employer — a  railroad — was  made  liable  for  practically  all 
accidents  to  its  employees;  and  the  Court  held  that  it  was 
necessary  to  distinguish  between  the  hazardous  occupations  and 
non-hazardous  occupations  of  the  railroad  industry,  and  to 
limit  the  more  absolute  liability  to  the  former ;  but  the  Supreme 
Court  of  the  United  States  has  recently  held  the  other  way, 
but  not  quite  as  definitely  and  as  certainly  as  we  would  like  to 
have  it,  if  we  should  want  to  frame  a  law  to  place  the  liability 
upon  the  basis  which  I  have  been  advocating. 

The  next  serious  question  that  arises  is,  what  acts  of  an 
injured  employee  shall  constitute  a  defense  to  the  liability  for 
compensation.  The  English  law,  as  you  know,  excepts  from 
the  liability  those  accidents  due  to  the  serious  and  wilful  mis- 
conduct of  the  injured  workmen.  These  words,  "serious  and 
wilful  misconduct,"  have  been  fairly  defined  after  a  great  deal 
of  litigation;  but  still  they  are  in  some  respects  uncertain 
in  meaning.  Now  if  we  wish  to  have  a  definite,  certain  liabi- 
lity in  this  country,  it  seems  to  me  that  it  would  be  better 
to  define  in  our  law  exactly  what  acts  shall  exempt  the  em- 
ployer from  liability  for  compensation — exactly  what  acts  of 
the  claimant.  That  is  a  hard  problem;  but  it  is  just  one  of 
those  things  which  if  we  solve  in  the  statute  instead  of  leaving 
them  to  the  courts  to  work  out  will  be  conducive  to  reducing 
litigation  and  to  making  the  compensation  liability  more  reason- 
ably and  measurably  insurable. 

I  come  now  to  the  last  serious  difficulty  affecting  the  main 
question  of  "liability," — the  most  serious  difficulty  of  all,  and 
the  most  serious  constitutional  danger.  When  and  under  what 
conditions  should  the  option  to  sue  for  unliquidated  damages 
in  tort — that  is,  the  right  which  the  workmen  now  has  to  sue 


ADDRESS  OF  MR.   P.  TECUMSEH   SHERMAN  69 

his  employer  for  damage  for  negligence — be  reserved  to  the 
injured  workmen?  The  English  law  nominally  reserves  to  the 
injured  workman  a  complete  option  to  sue,  that  is,  to  recover 
compensation  or  to  sue  for  damages  in  tort.  The  New  York 
Compensation  Law  follows  the  English  law  in  this  respect ;  but 
the  effect  is  far  different.  In  the  first  place,  in  England,  the 
injured  employee  cannot  employ  an  attorney  on  a  contingent 
fee,  as  he  can  here.  He  has  to  have  a  better  case  so  that  he 
can  raise  some  money  for  attorneys'  fees  before  he  can  start 
litigation  for  the  common  law  or  tort  remedy.  In  the  second 
place,  the  liability  for  damages  for  negligence, — that  is,  what 
we  lawyers  call  the  tort  liability,  which  existed  in  England 
at  the  time  of  the  workmen's  compensation  act — did  not  go 
nearly  as  far  as  our  corresponding  liability  law  here; — it  was 
more  nearly  like  the  old  common  law  liability,  with  all  its  de- 
fenses ; — so  that  the  workman  in  England  does  not  have  such  a 
great  incentive  to  bring  his  suit  for  tort,  as  he  does  in  New 
York.  So,  I  think,  and  I  think  that  it  is  the  general  opinion  of 
attorneys  who  have  studied  this  subject  fairly,  that  the  existing 
right  of  the  workman  to  sue  for  unliquidated  damages  should 
be,  as  far  as  possible,  revoked.  How  far  it  can  be  revoked  is 
a  disputed  question  also;  but  in  my  own  opinion  it  can  be 
altogether  taken  away  in  any  constitutional  manner.  Where 
a  man  wrongs  you — I  am  talking  about  absolute  justice — where 
a  man  really  wrongs  you,  the  right  to  sue  that  man  for  damages, 
in  my  opinion,  cannot  be  taken  away  by  any  statute  under  our 
constitutions.  But  that  merely  means  that  the  employer  must 
remain  liable  for  damages  in  tort  only  where  he  personally 
is  morally  guilty  of  some  serious  or  wanton  neglect  or  wrong. 
And  I  think  that  if  we  could  get  a  compensation  law  so  framed 
as  to  revoke  the  right  to  sue  for  damages  except  in  such  cases, 
there  would  be  very  few  cases  in  tort.  But  there  is  still  a 
further  difficulty  at  this  point,  which  is  that  some  of  the  state 
constitutions  go  further  and  provide  that  you  can  not  repeal 
the  existing  right  to  sue  for  damages  in  tort.  In  the  event  of 
the  death  of  the  injured  workman,  that  is  the  case  in  New 
York.  So,  in  New  York,  we  can  only  go  back  to  conditions 
in  1895,  in  case  the  workman  is  killed. 

There  are  quite  a  number  of  other  points  affecting  the 
main  question  of  "liability,"  but  I  see  I  have  already  exceeded 


70  ADDRESS  OF   MR.   P.   TECUMSEH   SHERMAN 

my  time  and  therefore  will  skip  them.  But  I  wish  you  to 
understand  that  what  I  have  said  simply  scratches  the  surface 
of  the  difficulties,  all  of  which  you  would  be  interested  in  and 
all  of  which  will  affect  your  business  when  they  are  decided  by 
any  legislature. 

The  question  of  arbitration  arises:  In  framing  the  pro- 
cedure to  determine  the  liability  and  the  amount  of  compen- 
sation can  we  take  away  the  right  of  parties  to  demand  a  trial 
by  jury;  or  can  we  force  them  to  arbitrate?  Personally,  I  do 
not  believe  that  we  can  force  them  to  arbitrate.  I  think  that 
we  will  have  to  leave  to  both  parties  the  right  to  demand  a 
trial  by  jury;  but  I  think  that  if  we  provide  the  machinery 
or  point  out  and  authorize  methods  for  easy  arbitration,  that 
there  will  be  comparatively  few  suits  at  law,  and  a  great  many 
arbitrations. 

The  next  point  I  want  just  to  touch  on  is  the  fact  that 
when  we  have  provided  the  basis  of  liability  and  the  machinery 
to  determine  and  to  make  definite  and  certain  the  question  of 
liability,  there  still  remains  half  of  the  problem  unsolved;  and 
that  is  the  determination  of  the  medical  facts,  the  facts  as  to 
the  injury  to  the  injured  workman.  Those  facts  can  not  be 
determined  in  one  arbitration  proceeding  or  in  one  trial.  A 
workman  is  injured ;  he  goes  through  a  period  of  acute  distress ; 
later  he  gets  better;  he  returns  to  work;  some  times  there  are 
recurring  evil  consequences;  these  things  run  along  so  that, 
in  order  to  determine  and  make  certain  the  physical  injury 
upon  which  the  amount  of  compensation  is  based — for  com- 
pensation aims  to  give  to  the  injured  workman  a  certain  pro- 
portion of  his  probable  financial  loss,  measured  by  his  reduced 
earning  power — in  order  to  ascertain  the  facts  (I  don't  mean 
to  arrive  at  a  verdict  or  a  compromise),  it  is  necessary  that  the 
employer,  from  the  time  the  accident  happens,  so  long  as  the 
liability  continues,  should  have  the  right  to  medical  examination 
of  that  injured  workman,  under  fair  conditions.  And,  as  an 
equivalent  for  that,  it  is  fair  that  he  should  have  some  obliga- 
tion— and  that  obligation  may  be  expensive  and  it  may  trouble 
your  business — some  obligation  to  provide  for  first  care  in 
case  of  accident,  where  he  has  been  notified  of  the  accident. 
This  should  simply  open  up  to  your  minds  a  subject  you  are 


ADDRESS  OF  MR.  P.  TECUMSEH   SHERMAN  *J1 

perfectly  familiar  with,  I  think;  but  it  is  a  subject  just  as 
difficult  as  the  question  of  liability. 

The  last  point  that  I  would  call  to  your  attention  is  the 
necessity  of  providing  some  alternative — some  elective  alter- 
native to  the  obligation  which  a  compensation  law  would  impose 
on  the  employer.  A  compensation  law  to  apply  generally  to 
all  employers,  I  think  it  is  universally  admitted,  is  necessary; 
but  there  will  be  many  employers,  especially  in  large  industries, 
who  will  get  up  schemes  of  their  own — there  are  many  already 
— which  schemes  will  provide  for  the  employees  injured  on  a 
better  basis  than  the  liability  which  a  compensation  law  would 
impose  on  employers  in  general.  Such  schemes  should  be  per- 
mitted by  any  just  compensation  law.  They  should  be  per- 
mitted to  replace  that  law  from  beginning  to  end  and  to 
replace  all  other  liability  whatsoever.  I  think  that  such  schemes 
present  the  solution  of  this  problem  in  the  large  industries; 
and  that  the  legal  compensation,  which  we  hope  to  have  adopted 
by  law  in  all  the  legislatures  of  all  the  states  of  our  country, 
presents  the  solution  for  the  vast  body  of  small  employers. 


72.  ADDRESS  OF  DR.  R.  S.  KEELOR 


Address  of  Dr.  R.  S.  Keelor 

Mr.  Chairman  and  Gentlemen,  this  subject  has  been 
handled  now  from  practically  every  possible  interested  view- 
point, excepting  only  that  of  the  insurance  companies.  I 
propose  in  what  I  shall  have  to  say,  representing  the  attitude 
of  the  insurance  companies  toward  this  question  of  work- 
men's compensation,  to  draw  largely  upon  matters  which  I 
had  outlined  for  an  entirely  different  purpose,  and  if  when 
I  get  into  the  discussion  of  my  subject,  it  shall  appear  to 
some  of  you  that  I  am  taking  up  matters  that  are  not  strictly 
germane,  I  trust  you  will  suspend  judgment  until  I  get 
further  into  the  subject. 

What  I  have  heard  stated  here  today  by  other  speakers 
would  seem  to  me  to  emphasize  the  need  of  presentation  of  the 
companies'  viewpoint  of  this  matter,  and  I  think  the  insurance 
companies  are  pre-eminently  entitled  to  be  heard  upon  it,  be- 
cause it  is  exceedingly  probable  that  they  will  be  called  upon 
to  bear  a  very  important  part  in  giving  effect  to  any  com- 
pensation laws  which  may  be  enacted  in  this  country. 

An  accident  that  occurred  in  England  in  1837,  incident 
to  the  use  of  a  butcher's  cart,  led  to  a  suit  for  damages  on 
account  of  personal  injury  and  started  a  discussion  that  has 
filled  page  after  page  in  the  law  books  of  that  country,  and 
likewise  in  those  of  the  United  States,  since  the  common  law 
of  this  country  has,  in  its  development,  closely  followed  pre- 
cedents established  in  England.  The  discontent  of  the  work- 
men, because  of  the  strict  application  by  the  English  courts 
of  the  doctrine  of  "assumed  risks,'*  of  "common  employ- 
ment" and  "vice-principal"  in  favor  of  the  employer,  led  to 
the  enactment,  first,  of  the  employers'  and  workmen's  act  of 
1876,  and  later  to  that  of  the  employers'  liability  act  of  1880, 
the  substance  of  which  was  soon  thereafter  adopted  into  the 
legislation  of  Alabama  and  Massachusetts;  and  one  of  the 
important  results  of  this  legislation  was  the  introduction  of 


ADDRESS  OF  DR.  R.  S.  KEELOR  73 

liability  insurance,  because  it  was  conjectured  that  the  agita- 
tion preceding  the  enactment  of  these  laws  and  the  removal 
of  some  of  the  employer's  defenses  would  increase  the  chances 
of  success  in  suits  for  personal  injury  damages  and  must 
result  in  a  very  considerable  increase  in  the  number  of 
claims  made  by  workmen  upon  their  employers  on  account  of 
such  injuries,  and  it  was  reasoned  that  liability  insurance 
must  soon  become  more  or  less  of  a  recognized  necessity  for 
the  distribution  of  the  burden  of  loss.  Only  employers* 
liability  insurance  was  undertaken  at  the  beginning,  but  the 
principle  of  liability  insurance  was  soon  extended  and  applied 
to  other  risks,  involving  the  liability  of  the  employer  or 
of  the  owner  of  property  for  loss  arising  from  personal 
injury  sustained  by  the  public,  and  while  the  companies,  as 
a  rule,  made  such  segregation  of  the  different  kinds  of  liability 
insurance  as  has  been  necessary  for  statistical  purposes,  the 
reports  made  to  the  States  have  dealt  with  premiums  received 
and  losses  paid  in  the  aggregate.  In  England,  and  on  the 
Continent  of  Europe,  employers'  liability  laws  have  been  sup- 
plemented by  the  enactment  of  laws  providing  in  each  country 
a  fixed  scale  for  the  compensation  of  all  accidents  arising  out 
of  and  in  the  course  of  employment,  excepting  only  such  ac- 
cidents as  may  result  from  wilful  negligence  on  the  part  of 
the  injured  person.  These  laws  are  known  as  workmen's 
compensation  laws,  and  it  may  be  noted  in  passing  that  they 
did  not  originate  with  the  workmen  themselves,  but  were 
passed  in  behalf  of  the  governmental  authorities  as  economi- 
cal measures  tending  to  place  a  check  upon  pauperism.  The 
Hon.  Joseph  Chamberlain,  who  most  strenuously  advocated 
the  enactment  of  the  English  Workmen's  Compensation  Law, 
stated  among  other  things  that  20  per  cent,  of  the  English 
working  class  became  a  charge  upon  the  community  before 
attaining  the  age  of  sixty  years,  and  that  such  a  law  would  at 
least  place  this  burden  where  it  belonged. 

In  this  country  the  subject  of  workmen's  compensation 
was  brought  prominently  before  the  public  by  Mr.  Roosevelt 
in  a  notable  address  delivered  at  the  opening  of  the  James- 
town Exhibition,  and  it  has  since  engaged  the  attention  of  a 
class  of  persons  identified  with  movements   for  civic  better- 


74  ADDRESS  OF  DR.  R.  S.  KEELOR 

ment  and  social  welfare,  and  through  the  persistent  efforts  of 
those  people,  commissions  have  been  appointed  in  certain  States 
to  investigate  the  relation  between  employer  and  employee  as 
respects  the  compensation  received  by  the  latter  on  account 
of  industrial  accidents,  the  cost  to  the  employer  for  such  acci- 
dents or  for  insurance  covering  the  same  and  the  advisability 
of  supplementing  or  supplanting  existing  laws  by  the  enact- 
ment of  workmen's  compensation  laws. 

It  is  to  be  regretted  that  some  of  those  who  have  been 
most  active  in  spreading  this  propaganda  have  assumed  that 
the  companies  writing  employers'  liability  insurance  desired 
to  perpetuate  the  existing  system  for  compensating  workmen 
for  injuries  sustained,  and  it  is  likewise  regrettable  that  they 
have  made  it  a  point  to  refer  to  the  operations  of  such  com- 
panies as  extravagant  and  unfair,  and  this  leads  me  to  the 
question.  What  is  the  attitude  of  insurance  companies  toward 
workmen's  compensation? 

Liability  underwriters  and  the  casualty  insurance  interests 
generally  have  recognized  the  fact  that  such  compensatory 
damages  as  employees  have  been  able  to  collect,  on  account 
of  personal  injuries  resulting  from  proven  negligence  upon 
the  part  of  their  employers,  left  many  employees  or  their  de- 
pendents more  or  less  helpless,  but  they  have  likewise  recog- 
nized the  fact  that  their  contractural  relations  were  with  the 
employers  who  paid  their  insurance  premiums  with  the  under- 
standing that  the  companies  should  only  indemnify  them 
against  loss  incurred  by  reason  of  their  legal  liability  for  in- 
juries sustained  by  employees  under  existing  laws,  and  yet 
it  may  be  stated  that  in  any  number  of  instances  workmen 
have  fared  better  at  the  hands  of  liability  insurance  com- 
panies than  they  would  have  fared  if  required  to  deal  only 
with  their  employers. 

The  insurance  companies'  position  has  been  that  if  the 
system  of  compensating  injuries  was  wrong,  it  was  not  within 
their  province  to  correct  it,  and,  doubtless,  they  would  have 
been  unfairly  criticized  if  they  had  started  a  movement  to  pro- 
vide a  more  broad  law  for  the  compensation  of  personal 
injuries.  In  fact,  complaints  have  recently  been  made  in  trade 
papers  that  the  insurance  companies  advocated,  secretly,  if 
not  openly,  the  enactment  of  laws  in  the  State  of  New  York 


ADDRESS  OF  DR.  R.  S.  KEELOR  75 

that  have  made  necessary  an  advance  in  the  cost  of  insurance 
for  the  protection  of  the  employer,  and  that  this  advocacy 
upon  the  part  of  insurance  companies  was  in  disregard  of 
the  interests  of  their  patrons,  and  that  they  have  made  the 
enactment  of  these  laws  a  pretext  for  the  charging  of  ex- 
orbitant rates  for  insurance.  Nothing  can,  of  course,  be  fur- 
ther from  the  facts  than  accusations  of  this  character. 

It  is  unavoidable  in  the  conduct  of  the  liability  insurance 
business  that  there  is  at  all  times  a  large  element  of  deferred 
liability,  the  actual  amount  of  which  is  not  determinable  until 
a  period  of  about  seven  years  has  elapsed,  and  it  is,  there- 
fore, misleading  to  quote  any  experience  that  relates  to  un- 
completed business.  It  will  be  found  that  the  average  claim 
cost  of  uncompleted  business  has  been  about  55  per  cent,  of 
the  premiums.  If,  however,  only  employers'  liability  pre- 
miums and  losses  are  considered,  the  ratio  of  loss  to  premium 
will  be  found  to  be  considerably  in  excess  of  55  per  cent. 
In  the  report  of  the  Illinois  Employers'  Liability  Commis- 
sion, the  statement  is  made  that  in  1908  $22,000,000  were 
contributed  by  employers  as  premiums  to  liability  insurance 
companies  in  the  United  States,  and  that  only  $5,500,000  of 
this  amount  reached  the  injured  workmen  or  their  dependents. 
This  statement  ignores  entirely  the  fact  that  a  considerable 
part  of  the  premiums  mentioned  did  not  apply  to  employers' 
liability  insurance,  but  related  to  policies  covering  elevators, 
buildings  and  public  liability  hazards  generally,  it  also  ignores 
the  very  important  factor  of  deferred  liability,  the  amount  of 
which  cannot  be  ascertained  until  at  least  seven  years  shall 
have  clasped. 

Likewise,  it  has  been  unavoidable  that  the  cost  of  ad- 
ministration, upon  the  part  of  the  casualty  companies,  has 
approximated  45  per  cent,  of  the  premiums.  The  business  is 
one  of  small  details,  requiring  a  large  clerical  force  for  its 
proper  handling;  it  must  be  actively  solicited  by  men  specially 
trained,  and  the  risks  must  be  repeatedly  inspected  by  me- 
chanical engineers  and  experts,  whose  business  it  is  to  detect 
defects  and  unnecessary  dangers,  and  to  suggest  measures  to 
minimize  the  chance  of  accident  and  personal  injury  incident 
to  the  conduct  of  the  business  covered  by  the  insurance 
policies.     Then,  too,  insurance  premiums  are  taxed  and  the 


'jd  ADDRESS  OF  DR.  R.  S.  KEELOR 

companies  are  required  to  pay  licenses  and  other  fees,  the 
aggregate  of  such  taxation  being  greater  than  that  imposed 
on  any  other  business.  From  what  has  been  stated,  it  will 
be  seen  that  as  a  business,  liability  insurance  has  not  been 
profitable  to  insurance  companies,  and  for  this  reason,  coupled 
with  the  great  uncertainty  as  to  the  actual  amount  of  de- 
ferred liability  involved  in  its  transaction,  insurance  com- 
panies will  welcome  any  system  for  the  compensation  of 
injuries  to  workmen  that  will  substitute  for  the  uncertainties 
of  existing  laws  a  definite  schedule  of  compensation  to  be  paid 
for  injuries,  so  that  premium  tables  adequate  to  meet  the 
same  may  be  established,  and  the  business  of  insuring  the 
employer  against  loss  sustained  by  reason  of  injuries  to 
his  workmen  placed  upon  a  more  certain  plan  than  now  exists. 

Casualty  insurance  companies  have  offered  workmen's 
collective  insurance  in  conjunction  with  employers'  liability 
insurance  for  the  purpose  of  more  adequately  compensat- 
ing unfortunate  employees  for  the  loss  sustained  by  reason 
of  industrial  accidents.  Under  this  plan,  a  blanket  policy  is 
issued  to  the  employer  to  cover  all  accidents  which  arise 
out  of  and  in  the  course  of  employment;  half  wages  being 
paid  during  the  period  of  disablement,  not  to  exceed  six 
months  or  one  year,  as  may  be  agreed  upon,  while  lump 
sums  are  paid  for  loss  of  life,  sight  or  limbs  (usually  half 
of  one  year's  wages  not  to  exceed  $1,500).  In  some  instances 
the  employer  has  paid  the  premium  for  such  insurance — 
in  other  instances  the  employer  and  employee  have  shared 
in  the  premiums.  Again,  in  other  instances,  employees  have 
paid  the  premium  in  easy  instalments  deducted  from  their 
wages. 

Workmen's  collective  insurance  has  never  been  very 
popular  in  this  country,  although  the  benefits  provided  to 
workmen  have  been  quite  liberal  when  the  premium  rate  is 
considered,  and  in  1909  the  premiums  for  this  kind  of  in- 
surance amounted  to  only  $473,907.  Statistics  covering  an 
exposure  equal  to  one  hundred  thousand  men  for  one  year 
and  involving  approximately  $50,000,000  in  wages  paid  to 
workmen,  insured  under  workmen's  collective  policies,  have 
been  gathered  together,  and,  unquestionably,  inasmuch  as 
this    experience    includes    light    and    heavy    manufacturing, 


\ 


ADDRESS  OF  DR.  R.  S.  KEELOR  ^^ 

a  large  variety  of  industries  being  interested,  and  particularly 
in  view  of  the  fact  that  it  deals  with  actual  conditions,  as 
they  exist  in  this  country,  any  figures  deduced  therefrom 
would  be  more  reliable  as  an  index  of  the  probable  cost  of 
workmen's  compensation  than  any  theorizing  based  upon  any 
other  kind  of  experience,  either  foreign  or  American. 

I  am  sure  that  I  voice  the  consensus  of  opinion  among 
insurance  men  when  I  say,  first,  that  laws  should  be  enacted 
to  require  employers  to  provide  every  reasonably  possible  pro- 
tection against  accidents,  and  to  make  a  wilful  disregard  of 
such  provision  punishable;  second,  the  removal  by  any  em- 
ployee of  safeguards  installed  by  the  employer  should  be 
made  punishable;  third,  that  any  bodily  injury  resulting 
from  an  accident  arising  out  of  and  in  the  course  of  em- 
ployment, and  not  due  to  the  wilful  negligence  of  the  em- 
ployee, should  be  compensated.  I  think  I  have  a  considerable 
following  among  my  confreres  in  the  casualty  business  when 
I  state  that  it  is  questionable  whether  it  is  equitable  to  ignore 
the  responsibility  of  the  employee  entirely  when,  in  spite  of 
precautions  taken  by  his  employer,  he  is  injured  through  his 
own  wilful  negligence,  and  that  the  expediency,  from  a  social 
and  economical  viewpoint  of  any  scheme,  that  in  its  final 
analysis,  requires  the  consumer  to  pay  for  the  workman's 
disregard  of  his  own  safety  is  likewise  questionable. 

If  the  workman  has  a  constitutional  right  to  seek  redress 
by  jury  trial  that  cannot  be  abridged,  or  if  for  any  other 
reason  it  would  be  unconstitutional  to  substitute  workmen's 
compensation  for  existing  methods  of  compensating  injuries, 
manifestly  workmen's  compensation  can  only  come  as  an  ad- 
dition to  existing  laws,  and  the  workman  will  then  be  free  to 
choose  his  remedy  and  obviously  this  will  mean  that  every 
accident  will  be  paid  for  at  the  highest  possible  cost  to  the 
employer.  But  do  workmen,  as  a  class,  want  workmen's 
compensation?  Apparently  not,  if  their  attitude  as  developed 
by  the  Legislative  Commission  in  Illinois,  may  be  taken  as  a 
guide  (and  a  similar  attitude  has  been  shown  elsewhere)  and 
there  is  reason  for  believing  that  any  compensation  law  to  be 
satisfactory  to  the  workmen  in  this  country  must  provide  a 
scale  of  compensation  very  much  higher  than  obtains  in 
any  other  country,  unless  they  are  left  free  to  sue  for  damages 


yS  ADDRESS  OF  DR.  R.  S.  KEELOR 

under  provisions  of  law  that  practically  deprive  the  employer 
of  all  defenses,  and  if  either  of  these  alternatives  is  adopted 
a  very  large  increase  in  the  cost  of  accidents  must  follow. 
The  so-called  Wainwright  Compulsory  Compensation  Law, 
applicable  to  certain  dangerous  employments  named  therein, 
and  which  became  effective  in  the  State  of  New  York  on 
September  first  is  unsatisfactory  from  an  insurance  point  of 
view,  because,  first,  it  does  not  cover  every  kind  of  employ- 
ment— the  reasons  for  its  limitations  in  this  respect  are, 
however,  appreciated — and  second,  it  is  indefinite  and  un- 
certain as  to  the  intention  of  covering.  I  may  inject  here  that 
I  had  prepared  a  draft  of  compensation  law  which  I  will 
omit.  In  the  draft  of  that  law,  however,  I  omit  the  use  of 
the  word  "serious"  in  connection  with  the  word  "wilful"  in 
dealing  with  the  question  of  contributory  negligence,  because 
I  am  convinced  its  use  in  such  connection  would  add  materi- 
ally and  unjustly  to  the  cost  of  temporary  disablements,  and 
would,  moreover,  add  to  the  difficulty  of  reaching  prompt  de- 
cisions. A  further  saving  in  cost,  but  how  much  I  am  wholly 
unprepared  to  say,  might  be  effected  by  incorporating  a  pro- 
vision in  any  compensation  law  permitting  contracting  out 
of  the  law,  whereby  employees  who  have  attained  an  age  of, 
say,  sixty  years  shall  be  fully  compensated  by  the  payment  of 
indemnities,  reduced  to,  say,  one-half  of  those  provided  for 
in  the  law,  and  it  is  important  that  all  persons  considering 
workmen's  compensation  as  an  economic  question  shall  be  made 
to  see  the  inadequacy  of  any  estimates  that  have  heretofore 
been  made  with  respect  to  the  ultimate  cost  of  compensation 
upHDn  such  scales  of  benefits  as  have  from  time  to  time  been 
under  consideration.  And  in  passing  I  want  to  emphasize  the 
fact  that  there  is  grave  doubt  whether  the  going  rates  for 
employers'  liability  insurance  at  the  present  time  are  high 
enough  to  meet  the  increased  cost  growing  out  of  the  modifi- 
cation of  the  Employers'  Liability  Law  in  this  State.  This 
subject  has  been  referred  to  by  one  or  two  of  the  speakers. 
It  remains  to  consider  briefly  what  would  probably  be  the 
cost  of  such  compensation  as  is  provided  for  in  the  British 
Workmen's  Compensation  Law  if  applied  in  this  country,  and 
when  I  refer  to  cost  or  to  experience  under  workmen's  col- 
lective policies  I  would  be  understood  as  dealing  with  the 


ADDRESS  OF  DR.  R.  S.  KEELOR  79 

claim  cost  only.  Heretofore,  under  the  employers*  liability 
policies  issued  in  this  country  about  one  employee  in  every 
eight  persons  injured  received  compensation  from  the  insurance 
companies  for  industrial  accidents,  existing  laws  not  per- 
mitting a  recovery  of  damages  where  the  accident  resulted 
from  negligence  upon  the  part  of  the  injured  employee  or  one 
of  his  fellow  servants,  or  from  any  ordinary  or  obvious  risk 
of  the  employment,  and  among  those  who  have  received  com- 
pensation must  be  included  those  whose  claims  were  com- 
promised and  paid  upon  the  theory  of  saving  expense  of  litiga- 
tion and  without  regard  to  the  liability  of  the  employer,  the 
insurance  companies  frequently  taking  the  ground  that  it  was 
better  to  pay  something  by  way  of  compromise  than  to  incur 
recovery  of  damages  in  a  comparatively  small  percentage  of 
the  expense  of  litigation.  If  in  place  of  laws  permitting  a 
cases,  laws  are  enacted  making  the  employers  liable  in  practi- 
cally every  case  for  such  damages  as  a  jury  may  award,  or 
for  such  compensation  as  is  provided  by  proposed  compensa- 
tion laws,  the  increase  in  cost  must  be  self-evident. 

Returning  now  to  the  experience  contributed  to  the  Bu- 
reau of  Liability  Statistics  by  companies  writing  workmen's 
collective  insurance,  I  repeat  that  the  conditions  under  which 
this  experience  was  accumulated  by  the  companies  contribut- 
ing to  the  Bureau,  approach  the  conditions  that  would  exist 
under  the  operation  of  a  workmen's  compensation  law  in  this 
country  more  closely  than  any  experience  derived  from  other 
countries  or  from  any  other  source,  and  while  I  cannot,  with- 
out the  special  authorization  of  the  Conference  of  Liability 
Companies,  publish  this  experience,  I  am  able  to  state  the 
individual  experience  of  one  of  the  companies,  extended  to 
cover  a  scale  of  benefits  such  as  is  contemplated  in  the  pro- 
posed law,  and  I  have  checked  this  experience  with  that  of 
the  Company  with  which  I  have  the  honor  to  be  connected, 
and  I  feel  warranted  in  stating  that  the  experience  of  any  one 
company  is  fairly  indicative  of  what  is  shown  by  the  combined 
experience  upon  $50,000,000  of  payroll,  to  which  I  have  re- 
ferred. 

Upon  the  basis  stated  the  death  indemnities  would  cost 
.741,  but  a  deduction  may  be  made  from  these  figures  to  cover 
such   cases   as   leave   no   dependents   or  leave  persons   only 


8o  ADDRESS  OF  DR.  R.  S.  KEELOR 

partly  dependent.  The  indemnities  for  the  second  week  of 
disablement  would  cost  .105  and  the  indemnities  for  the  third 
and  all  subsequent  weeks  up  to  28  weeks,  .356.  All  further 
disablement  after  the  first  28  weeks  would  cost  .729,  making 
a  total  of  1.39.  If  the  first  week  of  disablement  were  to  be 
included  in  the  i\ct,  it  would  be  necessary  to  add  .191  to  the 
cost,  making  the  total  cost  2.12  for  each  $100  of  payroll  with- 
out loading  of  any  kind  for  expenses  or  other  purposes.  It 
may  be  interesting  to  note  in  passing  that  the  experience  of 
casualty  companies  shows  that  in  addition  to  the  loss  payments 
made  under  these  workmen's  collective  policies  it  has  required 
about  20  cents  per  $100  of  payroll  to  pay  the  losses  under  the 
concurrent  liability  policies,  this  indicating  the  extent  to  which 
the  employees  were  dissatisfied  with  the  compensation  pro- 
vided for  under  the  collective  policies,  and  representing  the 
amounts  recovered  where  employees  sued  for  damages  not- 
withstanding the  existence  of  workmen's  collective  policies, 
under  which  they  received  compensation  in  stated  amounts 
for  injuries  received. 

It  would  be  obviously  impossible  for  a  mutual  organi- 
zation to  set  aside  and  maintain  such  reserves  as  will  make 
future  loss  payments  reasonably  sure  unless  premium  rates 
practically  as  high  as  those  of  joint  stock  companies  are 
charged,  because  any  resources  carried  in  the  pockets  of  the 
mutual  stockholders  may  not  be  available  when  needed,  and 
this  would  seem  to  be  unanswerable  as  an  argument  against 
mutual  insurance  to  cover  workmen's  compensation.  Surely, 
if  the  State  commits  itself  to  the  principle  of  compensation  it 
cannot  consistently  put  aside  the  duty  to  see  that  tangible 
reserves  are  provided  to  make  the  loss  payments  certain,  and 
this  can  only  be  done  through  the  operation  of  joint  stock 
companies  authorized  and  supervised  by  the  Insurance  De- 
partment of  the  State.  There  is,  however,  another  reason 
why  the  mutual  plan  of  insurance  does  not  lend  itself  to 
risks  of  the  character  under  consideration.  The  payment  of 
the  premium  to  joint  stock  companies  disposes  of  the  em- 
ployers' liability  for  further  payments  and  insures  the  pay- 
ment of  losses  whenever  they  may  mature,  although  his  lia- 
bility for  such  losses  may  not  be  finally  determined  for  ten 
or  even  twenty  years  thereafter.     If,  however,  the  employer 


ADDRESS  OF  DR.  R.  S.  KEELOR  8 1 

pays  for  mutual  liability  or  compensation  insurance,  he  makes 
himself  and  his  heirs  liable  for  his  pro  rata  share  of  the  ulti- 
mate cost  of  all  policies  issued  during  the  term  of  his  insur- 
ance and  the  ultimate  cost  may  not  be  determined  during  his 
life  time.  In  this  way  partnership  and  private  estates  may 
become  seriously  affected,  as  a  result  of  carrying  mutual  in- 
surance of  this  character,  the  ultimate  cost  of  which  may 
be  many  times  its  original  cost. 

Mutual  insurance  will,  moreover,  not  cost  less  for  inspec- 
tion, investigation  and  handling  of  claims  than  stock  com- 
panies are  obliged  to  pay  for  these  items  and  the  cost  of 
administration  generally  when  added  to  the  claim  cost 
will  approximate  so  closely  the  cost  of  such  service  on  the 
part  of  stock  companies  that  the  difference  would  not  make 
up  for  the  objectionable  feature  arising  from  deferred  liability 
and  the  liability  of  solvent  policyholders  to  make  up  for  the 
insufficiency  of  original  premium,  even  including  the  share  of 
those  who  have  in  the  meantime  become  insolvent. 


82  ADDRESS  OF  MR.  STANLEY  L.  OTIS 


Address  of  Mr.  Stanley  L.  Otis 

Beyond  a  shadow  of  doubt  the  principle  of  workmen's 
compensation  is  fight;  of  that  I  am  sure  we  are  all  agreed. 
What  concerns  us,  then,  what  concerns  the  commissions  of 
the  several  States,  is  to  draft  a  law  that  will  be  fair  and  just 
to  the  employer,  employee  and  the  general  public  who  in  the 
last  analysis  will  carry  the  burden.  The  position  of  the  in- 
surance companies  is  an  incidental  one.  They  are  organized 
to  carry  on  the  business  of  insurance  and  to  furnish  the  ma- 
chinery for  the  distribution  of  the  losses. 

Under  any  form  of  Employers'  Liability  Law — ^under  any 
scheme  of  Workmen's  Compensation,  they  are  prepared  to 
write  the  business  at  rates  only  sufficient  to  meet  the  payment 
of  losses,  the  necessary  administration  expenses  including  get- 
ting the  business,  the  tax  of  from  2  per  cent,  to  5  per  cent,  on 
the  premiums  levied  by  the  different  States,  a  small  return  to 
their  stockholders,  and  the  cost  of  inspection  of  the  plants  of 
the  assured.  For  of  equal  importance,  yes,  even  greater  im- 
portance than  the  payment  of  indemnity  to  the  injured  person 
is  the  inspection  of  the  plant,  elevators,  boilers,  etc.,  of  the 
assured — the  pointing  out  of  defects — the  recommendation  of 
safe-guards  and  the  insisting  that  the  recommendations  be 
carried  out  or  the  policy  cancelled.  The  companies  pay  out 
many  thousands  of  dollars  yearly  making  inspections  and 
through  them  not  only  is  loss  by  death  averted,  but  also  many 
accidents  which  would  result  in  temporary  and  permanent  in- 
juries. Far  better  is  this  money  spent  in  preventing  accidents 
to  workmen  than  in  paying  for  them  afterwards.  And  so 
the  premiums  collected  in  the  past  have  included  a  sum  for  this 
purpose  and  so  the  premiums  to  be  collected  in  the  future 
should  include  this  item.  Any  statement  of  the  monies  paid 
out  by  insurance  companies  for  the  benefit  of  workmen  should 
include  not  only  the  money  they  received  for  injuries,  but  the 
money  spent  to  save  them  from  injuries. 


ADDRESS  OF  MR.  STANLEY  L.  OTIS  83 

The  cost  under  any  scheme  of  workmen's  compensation 
is  going  to  be  considerable.  When  you  agree  to  pay  every 
workman  or  nearly  every  workman  who  is  injured  where  here- 
tofore you  have  only  paid  one  in  eight,  it  is  going  to  require 
more  money.  The  cost  to  the  employer  is  bound  to  be  ma- 
terially increased — no  matter  how  economically  you  collect  this 
money  and  distribute  it  to  the  unfortunate  ones  entitled  to 
receive  it,  no  matter  how  little  you  pay  the  man  who  brings 
the  attention  of  the  employer  to  his  need  of  protection  and 
thus  saves  him  ofttimes  from  heavy  financial  loss  and  possible 
bankruptcy.  It  is  going  to  cost  some  money  to  the  employer 
or  the  general  public  who  will  ultimately  pay  it,  but  every  one 
is  ready  to  contribute  their  share  for  all  fully  appreciate  the 
injustice  of  the  present  situation. 

The  way  to  make  the  cost  a  reasonable  one  is  to  make 
the  scale  of  compensation  a  reasonable  one.  If  you  fix  the 
compensation  too  high,  it  puts  an  undue  burden  on  the  em- 
ployer as  well  as  the  temptation  to  malingering  on  the  part 
of  the  employee,  both  of  which  are  to  be  avoided.  Also  direct 
your  efforts  to  having  the  State  tax  on  premiums  abolished 
or  greatly  reduced,  having  better  factory  inspection  laws, 
requiring  the  use  of  safeguards  and  other  devices  for  the  pre- 
vention of  accidents.  Devise  some  plan  whereby  all  em- 
ployers will  readily  see  the  advantage  of  protection  and  thus 
reduce  the  expenses  of  obtaining  sufficient  risks  to  distribute 
the  losses  and  make  the  loss  ratio  a  normal  one. 

We  are  facing  a  situation  in  the  United  States  that  calls 
for  the  utmost  care,  the  utmost  wisdom  in  its  handling.  We 
cannot  afford  to  follow  the  assessment  plan  in  use  in  some  of 
the  foreign  countries  and  thus  at  the  very  beginning  endanger 
the  stability  of  the  scheme  and  defeat  its  purpose — the  com- 
pensation of  the  workman,  through  injury,  partially  or  totally 
incapacitated   from  further  work. 

The  present  value  of  the  money  needed  to  make  the  future 
payments  to  the  workman  should  be  collected  at  the  outset  and 
set  aside  as  a  reserve — carefully  guarded  under  the  super- 
vision of  the  proper  authorities.  It  should  not  remain  in  the 
pockets  of  the  employer — thus  subjecting  him  to  an  ever  in- 
creasing cost — resulting  in  dissatisfaction  to  the  employer — 
trouble  and  annoyance  to  those  in  charge  of  the  administration 


84  ,  ADDRESS  OF  MR.  STANLEY  L.  OTIS 

of  the  scheme  and  poor  protection  at  best  for  the  workman 
for  whose  benefit  these  laws  are  devised. 

I  repeat,  the  cost  of  Workmen's  Compensation  is  going 
to  be  heavy,  but  if  we  go  about  it  in  the  right  way  and  with 
the  right  spirit,  it  will  result  in  countless  good — the  cause  of 
humanity  will  be  immensely  benefited  and  our  nation  take  its 
place  at  one  bound  in  the  vanguard  of  the  countries  having  as 
their  chief  aim  the  protection,  betterment  and  uplift  of  the 
millions  of  industrial  workers  on  whose  prosperity  and  well 
being  the  very  life  of  nations  depend. 


ADDRESS  OF  MR.  WALTER  G.  COWLES  85 


Address  of  Mr.  Walter  G.  Cowles 

Mr.  President  and  Gentlemen:  I  am  genuinely  surprised 
to  be  called  upon  to  address  you  this  afternoon.  I  have  been 
away  for  a  couple  of  months,  and  I  came  down  here  to  the 
first  gathering  of  this  nature  I  have  had  the  privilege  to 
attend,  to  listen.  I  have  listened,  I  hope,  to  a  good  purpose. 
I  have  heard  a  lot  and  learned  a  lot,  and  I  shall  not  take  your 
time  now,  because  perhaps  there  has  been  talking  enough  and 
if  I  should  add  anything,  it  would  be  too  much.  As  I  am  on 
my  feet,  however,  I  crave  your  indulgence  for  a  very  few 
minutes  while  I  say  a  little  something  for  the  insurance  com- 
panies. 

Beyond  all  question,  there  is  a  necessity  for  a  change  in  the 
existing  laws.  What  it  will  be  is  not  within  the  province  of  the 
insurance  companies.  We  have  a  trite  saying  in  our  business 
that  the  people  make  the  laws  and  the  insurance  companies 
the  rates,  and  perhaps  that  should  be  the  rule.  I  have  noticed 
here  an  underlying,  and  I  think  unintentional  line  of  comment 
which  seems  to  be  in  criticism  of  the  insurance  companies. 
I  am  not  yet  quite  convinced  that  the  mortality  in  a  community 
can  be  lowered  by  abusing  the  undertaker. 

Now,  I  do  not  apprehend  that  anybody  discussing  or  study- 
ing this  question  desires  to  deceive  himself  or  be  guilty  of  any 
misrepresentation,  however  slight,  which  is  unfair  to  the  in- 
surance companies,  and  my  purpose  in  the  few  minutes  that 
I  shall  take  is  to  appeal  for  fairness  to  that  organization  through 
which  might  come  the  solution  of  these  problems.  The  work- 
man, the  employer,  the  commissioner  or  orator,  whoever  he 
may  be,  presents  to  you  problems  which  will  be  solved  some 
time.  We  will  no  doubt  some  time,  perhaps  by  the  accumula- 
tion of  experience,  be  able  to  provide  compensation  for  injured 
employees.  When  that  is  accomplished,  who  deals  with  the 
problem  but  the  insurance  companies  ? 


86  ADDRESS  OF  MR.  WALTER  G.  COWLES 

Gentlemen  have  said  here  in  the  course  of  these  discus- 
sions that  out  of  the  total  premiums  received  by  the  liability 
insurance  companies,  only  25  per  cent,  reaches  the  injured. 
In  the  first  place  I  challenge  that  statement.  It  is  at  variance 
with  all  published  statements  of  casualty  insurance  in  this 
country.  How  much  of  it  stops  between  the  insurance  com- 
pany and  the  injured  in  the  hands  of  the  shyster  lawyer, 
for  whom  a  poor  system  of  jurisprudence  is  responsible,  I 
don't  know.  You  cannot  charge  that  to  the  insurance  com- 
panies. 

The  insurance  companies  are  charged  with  wasting  money 
in  litigation.  The  insurance  companies  only  litigate  unworthy 
and  unjust  claims.  A  very  large  percentage  of  the  claims — I 
cannot  at  the  moment  state  just  what,  but  I  know  it  is  a  very 
large  percentage — are  won  in  the  courts  because  ^inder  the 
laws  that  exist  no  liability  for  that  claim  can  be  established. 
Are  the  insurance  companies  doing  wrong  in  setting  up  a 
defense  which  the  law  provides?  Is  not  insurance  the  distri- 
bution of  loss  by  means  of  the  payment  of  premiums?  Isn't 
it  the  duty  of  the  insurance  company  to  pay  claims  and  not  give 
away  its  money?  I  have  never  heard  it  claimed  expressly  that 
because  some  man  endorses  the  note  of  another,  and  has  it  to 
pay,  and  because  that  note  happens  to  be  held  by  a  poor  widow 
or  a  needy  individual,  he  ought  to  pay  the  amount  twice  instead 
of  once.  I  have  not  understood  that  there  is  anything  which, 
as  a  business  proposition,  compels  the  payment  of  money  not 
due,  and  yet  we  have  the  underlying  comment  that  the  in- 
surance companies  do  not  pay  enough;  that  they  ought  to  pay 
more  claims.  To  whom?  To  those  to  whom  they  are  not 
due  ?  Is  that  the  proper  way  to  distribute  a  trust  fund  ?  Are 
the  insurance  companies  to  be  criticised  because  a  jurisprudence 
exists  which  permits  a  shyster  lawyer  to  bring  a  suit  for 
$10,000  which  he  hopes  to  settle  for  $50?  Is  there  any  fault 
to  be  charged  to  the  insurance  companies  because,  knowing  of 
the  existing  conditions,  lawyers  in  this  great  city  and  in  others, 
beset  the  offices  of  the  adjusters  with  their  arms  full  of  papers 
representing  suits  which  they  propose  to  sell  for  what  they 
can  get?  Is  it  wrong  for  the  insurance  companies  to  spend 
the  money  which  policyholders  have  placed  in  their  hands  for 
the  purpose  of  putting  down  a  practice  like  that,  so  long  as  the 


ADDRESS  OF  MR.  WALTER  G.  COWLES  87 

law  exists  ?  We  are  told  that  one  of  the  first  things  that  will 
happen  is  to  compel  the  insurance  company  to  pay  when  the 
employer  is  insolvent.  At  the  same  time,  in  the  interest  of 
fairness,  why  not  make  the  insolvent  policyholder  pay  his 
premium  ?  Why,  gentlemen,  the  money  lost  by  the  liability  in- 
surance companies  of  this  country,  through  the  non-payment 
of  premiums  because  of  the  insolvency  of  policyholders,  will 
many,  many  times  pay  the  amount  saved  because  of  the  in- 
solvency of  the  employer. 

I  hear  that  loo  per  cent,  ought  to  be  saved  to  be  distributed 
among  the  injured  workmen  and  that  all  this  waste  above 
45  or  55  per  cent.,  which  is  positively  proven  as  the  payment 
on  account  of  claims  by  the  experience  of  all  companies,  should 
be  eliminated.  I  was  very  glad  to  hear  Mr.  Mitchell,  who 
has  been  a  great  student  of  this  situation  and  who  has  worked 
along  that  line,  say  to  you  that  there  was  something  else  to  be 
done  besides  compensating  the  injured — to  prevent  the  injury. 
That  is  something  you  can  do  to-morrow — that  is  something 
you  can  do  without  raising  any  question  respecting  the  con- 
stitutionality of  your  action. 

It  is  useless  to  talk  about  the  expenses  of  various  kinds 
to  which  the  insurance  companies  are  subjected  for  taxes, 
licenses,  and  so  forth,  which  to  a  certain  extent  are  proper, 
but  in  the  judgment  of  many  have  been  overworked.  I  chal- 
lenge anybody  to  correct  my  statement  that  there  is  no  fund 
existing,  whether  collected  by  the  State  or  by  a  private  corpora- 
tion, or  in  any  other  way,  that  is  distributed  without  cost.  The 
expense  of  distribution  exists  everywhere.  The  question  is, 
how  much ;  that  is  all.  Under  the  German  system  the  expenses 
have  been  as  high  as  15  per  cent.  In  England  the  expense 
to-day  is  over  40  per  cent.,  where  the  average  commission  to 
brokers  is  below  15  per  cent.,  probably  10  or  11  per  cent.  The 
reduction  of  commission  is  a  difficult  question  for  the  insurance 
companies  to  deal  with.  It  is  just  as  difficult  for  the  whole- 
saler to  try  to  regulate  the  rate  of  profit  which  the  retailer  shall 
accept.  Commissions  grow  out  of  competition.  The  gentle- 
man from  Australia  who  spoke  to  us  a  few  minutes  ago  illumi- 
nated the  whole  situation  in  that  single  remark  of  his,  "a 
tariff  is  the  best  thing  for  the  policyholder,  and  produces 
the  best  general  result."    We  are  not  permitted  to  have  it  here. 


88  ADDRESS  OF  MR.  WALTER  G.  COWLES 

Tariffs  are  not  permitted,  and  yet  in  the  formation,  under 
proper  regulation,  of  tariffs  that  fix  the  price  of  insurance, 
lies  the  remedy  for  many  of  these  troubles.  It  is  said  we  do 
not  furnish  data.  Why,  Heaven  knows  we  would  gladly  fur- 
nish it  if  we  had  it.  There  is  no  data.  Who  has  it?  I  hap- 
pen to  be  connected  with  one  of  the  large  companies — we 
haven't  it.  It  i^  said  that  in  making  an  effort  to  raise  the 
rates  we  have  acted  unjustly.  Withhold  your  judgment,  until 
you  know  about  it.  What  the  trade  papers  of  the  country 
took  upon  themselves  to  write  about  this  question  is  simply 
absurd.  What  do  they  know  about  it?  Nothing.  We  are 
doing  the  best  we  can  to  meet  the  situation  as  best  we  know  how 
— working  weekdays,  Sundays,  nights,  and  all  the  time — trying 
to  find  some  solution  of  the  problems  which  exist  under  the 
laws  of  the  States  of  New  York  and  Ohio.  We  do  not  criticise 
them.  We  deal  kindly  with  them.  We  meet  their  defects  on 
the  plane  of  friendship,  but  we  don't  wish  to  be  condemned 
while  we  are  finding  our  way  out  for  the  benefit  of  all.  In- 
surance men  are  decent  men.  We  are  all  brought  up  with  a 
certain  regard  for  honesty.  We  all  have  that  amount  of  business 
training  which  carries  with  it  a  desire  to  keep  on  good  terms 
with  our  fellow  men,  with  men  in  other  lines  of  business.  We 
are  trying  to  preserve  a  maligned  institution,  and  some  people 
are  unintentionally  making  it  difficult  for  us  to  do  so  by 
criticising  us  unfairly.  Gentlemen,  there  is  a  lot  to  be  said  on 
this  subject,  and  a  lot  that  somebody  else  can  say  better  than  I 
can.  I  can  only  offer  you  the  earnestness  of  my  purpose  as  an 
apology  for  what  I  have  said. 


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